Beating El Niño
Most economy watchers are upbeat about India’s growth prospects in the current fiscal, more so after the revised better-than-expected GDP numbers for 2022-23. But there are three possible headwinds: A general global economic slowdown that can impact exports, the cumulative effect of interest rate increases in the past one year, and El Niño. It’s the last one that poses the most immediate threat. Most climate models are indicating high probabilities for El Niño developing by July-August. This has also led the India Meteorological Department to forecast aggregate rainfall over the country during June-September at 96 per cent of the long period seasonal average, making it a just-about normal monsoon.
In the event of a subnormal season, the most obvious casualty would be the kharif crops that are mainly planted during June-July. The more the delay in the monsoon’s onset and coverage across the country, it reduces the sowing window as well the period for plant growth. Also, if the transition to El Niño happens midway through the season, and given its usually lagged effect on actual rainfall, the resultant moisture stress could extend to the rabi winter-spring crops. Of course, these are extreme scenarios for now. But the fact remains that the Indian economy’s fortunes are still tied to the monsoon, which has a bearing not just on agriculture production, but also hydro power generation and drinking water availability. And after four consecutive good monsoon years from 2019, this is one risk factor that simply cannot be wished away while making any growth projections.
The redeeming part, however, is that the overall food supply situation is fairly comfortable compared to a year ago at the height of the Russia-Ukraine war, or even two months back, when there was a lot of uncertainty over India’s wheat crop and milk had turned the policymakers’ next big headache. Thankfully, the yield losses in wheat from unseasonal rains weren’t all that much and government agencies have procured enough grain to meet the requirements of the public distribution system. Surplus pre-monsoon showers, alongside a surprisingly mild summer so far, have been favourable for fodder growth and milk production, improving supplies to dairies and easing price pressures. The availability position is good in edible oils (courtesy of a crash in global prices) and reasonably so in pulses too (due to ample stocks of chana with the government and imports of masoor). Both the government and the RBI should keep a close watch on the monsoon, but there’s no need to sound the alarm bell.
The Indian Express