What happens if rainfall is not normal this year?
In this issue:
» Consumer prices in India still high
» What the Fidelity corpus means for distributors
» West Bengal could be bailed out
» RBI has faith in the financial system
» ...and more!
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Having said that, the weather department has also thrown in a googly. It has said that there is a 39% probability of the emergence of weak El Nino conditions during the latter part of the monsoon season and a 24% probability for below-normal rains. If El Nino does lead to reduced rains, it may prevent India from repeating the bumper harvests of summer-sown crops it recorded in 2010 and 2011. It must be noted that this condition was precisely what led to lower rains in 2009 and significantly impacted agricultural production thereby leading to higher food prices.
We believe that predictions made by the weather department should be taken with a pinch of salt. What matters is what the government has been doing to reduce the dependence on monsoons for bolstering agricultural production. Has it been making sufficient investments in ramping up irrigation techniques, water harvesting etc? Are there enough storage facilities for foodgrains? The latter point becomes important because adequate storage of foodgrains during bumper years can be used in years plagued by inadequate rainfall. This helps to keep prices of foodgrains in check to a certain extent.
So tied up it has been with sorting out corruption and party problems that the current government has hardly done much in the way of productive investments for India's long term growth. But agriculture and food is a tricky issue. The central bank has cut interest rates for the time being but is wary of more such cuts in the future as it continues to monitor inflation. If for some reason, monsoons fail to deliver, is the government well equipped to ensure food for all while ensuring that inflation does not shoot up? That remains the million dollar question.
Do you think that the government will be able to keep food prices under control if monsoons fail to deliver? Share with us or post your comments on Facebook page / Google+ page.
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Chart of the day | |
Data Source: The Economist |
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The Indian stock markets closed the week on a negative note. S&P downgrade, weak earnings outlook and rising worries over widening current and fiscal deficit took a toll on markets. Further, it may be noted that the prevailing confusion over General Anti Avoidance Rules (GAAR) for a long time is impacting the FII (Foreign Investment Institutions) flows. Thus, the foreign sentiment is also sluggish due to policy ambiguity.
Amongst, the other world markets France was the biggest gainer (up by 2.4%), followed by US (up by 1.5%). India and Brazil displayed weak performance during the week and were down by 1.4% and 1.3% respectively.
Data Source: Yahoo Finance |
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Weekend investing mantra |
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4 Responses to "What happens if rainfall is not normal this year?"
N M R Shreedhar
Apr 30, 2012how about privatising the Food Corporation of India and regulating the quantity,quality and prices at which the foodgrains can be sold at Fair price shops? this can be a win-win situation for both the government as well as the private frim--the private firm may be allowed to sell the balance quantity (after allocating the government quota)in the open market. Of course, the govt should also fix the minimun procurement price so that farmers get a fair price for their produce.
BTW,the 03:21 news item -- reg the ratings -- the sentence "unless some of the economic...." has a grammatical mistake conveying the wrong meaning. Hello, proof reader-r u awake? regds
P V Ranganathan
Apr 28, 2012"...is the government well equipped to ensure food for all while ensuring that inflation does not shoot up? That remains the million dollar question."
It is no more a Million dollar question. It is now a Billion Dollar Question
Dinyar Eduji
Apr 28, 2012Last year with normal rainfall the food inflations had touched its peak not seen before. Hence, that should answer your question to the readers.
MOHD NAJEEB
Dec 30, 2013what will happen if rain fall this year is less than last year plz detail me