Why mon­soon is so cru­cial for In­dia, Modi

Financial Chronicle - - GLOBAL, NATIONAL - RA­JEN­DRA JAD­HAV

In­dia’s mon­soon rains are likely to be 97 per cent of their long-term av­er­age in 2018, its me­te­o­ro­log­i­cal depart­ment said on Mon­day, re­as­sur­ing farm­ers ahead of sum­mer plant­ing in a coun­try where only half of farms is ir­ri­gated. What are the cat­e­gories of mon­soon? A nor­mal, or av­er­age, mon­soon means rain­fall be­tween 96 per cent and 104 per cent of a 50-year av­er­age of 89 cm (35 inches) in to­tal dur­ing the four-month mon­soon sea­son from June, ac­cord­ing to the In­dia me­te­o­ro­log­i­cal depart­ment’s clas­si­fi­ca­tion.

Rain­fall be­low 90 per cent of the av­er­age would be clas­si­fied as a drought. Dur­ing prime min­is­ter Naren­dra Modi’s first 2 years in of­fice, in 2014 and 2015, there were con­sec­u­tive droughts that led to some crit­i­cism due to the gov­ern­ment’s han­dling of the is­sue.

Rain­fall above 110 per cent of the av­er­age would mean an ex­ces­sive mon­soon, which would not be as dam­ag­ing as a drought but could be po­ten­tially harm­ful for the yields of cer­tain crops. The mon­soon sea­son starts with rains on the south­ern Ker­ala coast around June 1, cov­er­ing the whole coun­try by the mid­dle of July. Why is the mon­soon im­por­tant? The mon­soon de­liv­ers about 70 per cent of In­dia’s an­nual rain­fall and de­ter­mines the yield of key crops such as rice, wheat, sug­ar­cane and oilseeds such as soy­beans. The farm sec­tor ac­counts for about 15 per cent of In­dia’s $2 tril­lion econ­omy, but em­ploys more than half of the coun­try’s 1.3 bil­lion peo­ple. If mon­soon rains lift farm out­put, it can boost de­mand for con­sumer goods as it raises in­comes of ru­ral peo­ple.

A stronger eco­nomic out­look would lift eq­ui­ties, mainly for com­pa­nies sell­ing prod­ucts in ru­ral ar­eas, in­clud­ing con­sumer goods, au­to­mo­biles, fer­tilis­ers and pes­ti­cides.

In­dia is self-suf­fi­cient in crops such as rice and wheat, but a drought would re­quire the coun­try to im­port food­stuffs. In 2009, In­dia im­ported sugar af­ter poor rains, send­ing global prices to record highs and push­ing up lo­cal in­fla­tion.

Mon­soon rains re­plen­ish reser­voirs and ground­wa­ter, al­low­ing bet­ter ir­ri­ga­tion and more hy­dropower out­put. Higher rain­fall can trim de­mand for sub­sidised diesel, which is used to pump wa­ter from wells for ir­ri­ga­tion. How does the mon­soon af­fect in­fla­tion and cen­tral bank pol­icy? Food ac­counts for 50 per cent of In­dia’s con­sumer price in­dex, which the cen­tral bank closely mon­i­tors while de­cid­ing on mon­e­tary pol­icy. A bumper farm out­put would keep food prices under con­trol. Dur­ing past droughts, the gov­ern­ment sup­ported farm­ers by giv­ing out in­cen­tives, strain­ing the fis­cal deficit. A good mon­soon will limit gov­ern­ment spend­ing on such mea­sures. How re­li­able is the mon­soon fore­cast? The IMD is­sues its first fore­cast typ­i­cally more than a month ahead of the mon­soon’s on­set. On av­er­age, its fore­cast has been ac­cu­rate only once ev­ery 5 years over the past 2 decades, even af­ter tak­ing into ac­count an er­ror band of plus or mi­nus 5 per­cent­age points.

The IMD’s fore­cast for the 2017 mon­soon was its most ac­cu­rate since 2008. Last year, there was a dif­fer­ence of only 1 per­cent­age point be­tween fore­cast and ac­tual rain­fall. Even dur­ing nor­mal mon­soon years, some parts of In­dia face drought, while some oth­ers suf­fer from floods. The IMD will come out with a sec­ond fore­cast for the 2018 mon­soon rains in June. Why is the mon­soon im­por­tant for Modi ahead of the 2019 elec­tions? Modi, who has promised to dou­ble farm­ers’ in­come over five years, re­mains pop­u­lar nearly four years into his term. Farmer un­rest, how­ever, has flared in some states ruled by his party, catch­ing re­gional lead­ers flat-footed. A nor­mal mon­soon could lead to higher out­put of sum­mer-sown crops, help­ing state lead­ers pla­cate farm­ers.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.