Saturday, April 28, 2012

What happens if rainfall is not normal this year?

With India's weather department predicting normal monsoons this year, the Indian government will surely be breathing a sigh of relief. With so much on its plate already, the last thing it would want is for monsoons to play truant. The rainfall during June-September this year will likely be 99% of the long-term average. This would make it a third straight season of normal rains. India's weather department defines normal monsoon as seasonal rainfall between 96% and 104% of the long-term (or 50-year) average.

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.

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