Column: Govt action offers little succour

Jul 10 2014, 02:02 IST
Comments 0
SummaryThe need is to take a more open view on private and foreign investment in agriculture

There is considerable concern on the progress of the monsoon and understandably so. An adverse monsoon has the potential to retard the growth process as a lower farm performance this year would not just mean lower GDP growth, but also higher food inflation. High inflation, in turn, would not just further deplete the already low financial savings as households strive to protect their consumption levels by saving less, but also hold back RBI lowering policy rates. Therefore, while the government is striving to put the growth process back in motion, high inflation can upset calculations. What can the government do now?

The view in this column is that in the given situation, there may be little that the government can do in the short run to stabilise supplies and prices, which covers the rest of the fiscal year. To understand why this argument is being made, let us look at some inferences that can be drawn from our experiences in the last decade or so.

First, the monsoon patterns have changed. While officially the monsoon season is supposed to be between June and September, we have observed that invariably it starts towards the end of June and goes into October. Further, a normal monsoon, which is considered to be 96-104% of the long-term average, is a number that is only broadly indicative of the performance as it does not tell us about the spread across geographies, which is critical in affecting prospects of specific crops. Next, while the arrival is important as it affects sowing pattern and migration to other crops in case of a delay, the progress of the rains and the withdrawal are equally critical as crops require different amounts of moisture at different points of the crop cycle. Similarly, a late withdrawal of the monsoon, which has been the case in the last three years, tends to damage specific crops like pulses and vegetables that have impacted food inflation. Therefore, there is ambivalence in the concept of a normal monsoon.

Second, farm prospects are linked quite nebulously to the monsoon. Around 70% of the kharif crop is susceptible to monsoon winds with irrigation penetration being low in case of oilseeds, coarse cereals and pulses. Again, normal monsoon does not necessarily lead to a good kharif harvest as in the past output has fluctuated quite erratically. Also, at times, an adverse monsoon means lower kharif crops but better rabi output, especially

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...