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Monsoons: Rising fears - Views on News from Equitymaster
 
 
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  • Aug 14, 2009

    Monsoons: Rising fears

    The weather office is slowly acknowledging the grim situation. It cut its monsoon forecast further to 29%. This has raised the fear of further economic slowdown and lower yield of key crops.

    The government has indicated that though more than a quarter of districts were prone to drought, these districts are not major food grain producers. The crops that are most affected are sugarcane and soya beans.

    As of 10th August, the June-September rains were 42 per cent short over the cane-growing region of northwest India. Experts feel that it is already too late for the sugarcane crops. However, the soya bean crop may be saved after the rains on Wednesday over the soya bean growing region and with more rains predicted.

    But the soya bean crop may be the only silver lining. The government recently acknowledged that the sowing of rice has declined by 28.1% between June 1 and July 27 to 15.6 m hectares from 21.7 m hectares a year earlier. The rice crop or paddy this year is expected to be 13 m tonnes lower than last year. Moreover, the rains in August are expected to be much below the 90% average rainfall forecasted which may hit the rabi crops i.e. rapeseed and wheat.

    A possible silver lining?
    It is theorized that the drought will boost prices and hence farmer's income. Such a scenario depends on how severe is the crop failure. Domestic prices may rise to the point where imports become viable, effectively capping the extent to which prices may ultimately rise. Moreover, at the end of the day, farmers may not have enough stock to sell no matter what price he can command for it. The effect of crop failure does not end the same year since the famer has already incurred the cost of sowing the crops. It is possible that the loss incurred by the farmer may have a bearing next year as well since the farmer may lack the resources to invest in seeds and fertilizers the second time.

    National Food Security Bill
    One of the casualties of the deficient monsoons is the National Food Security Bill. This bill was part of the Manmohan Singh's 100 days roadmap and was an ambitious project to provide food security. Under this scheme it was proposed to provide all families below poverty line 25 kgs of rice or wheat for Rs. 2 per kg. The deficient rainfalls have upset the plans and they have been put on hold for now.

     

     

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