Impact of low rainfall on kharif output of foodgrains limited

FINANCIAL CHRONICLE | ADITI NAYAR
Published Oct 3, 2015, 4:35 pm IST
Updated Mar 27, 2019, 3:07 pm IST
IMD’s warning of a sub-par monsoon in 2015 helped lessen extent of damage

The substantial 14 per cent deficit in rainfall in June-September has culminated in the worst monsoon season since 2009, heightening the uncertainties faced by the farm sector. However, the early warning provided by the IMD has helped mitigate the extent of the stress created by the sub-par precipitation.

The IMD had sounded the alarm regarding the possibility of a sub-par monsoon in the current year as early as April 2015, estimating rainfall at 93 per cent of the long period average (LPA), with a model error of ± 5 per cent. In June, it revised its long range forecast for the 2015 monsoon downwards to a sobering 88 per cent of the LPA, with a model error of ± 4 per cent.

 

Following a delayed onset, rainfall exceeded the LPA by 16 per cent in June, providing a false sense of optimism. Subsequently, a deficit set in during July, which widened considerably in the second half of the monsoon season. Actual rainfall at 86 per cent of the LPA is somewhat lower than the IMD’s June central estimate of 88 per cent but within its forecast band (84 per cent-92 per cent).

The deviation from the June forecast for total precipitation at an all-India level is also at a four-year low. However, the extent of deviation in actual rainfall received from the IMD’s June central forecast has been substantial in two of the four sub-divisions, i.e., the southern peninsula (85 per cent vs 92 per cent) and central India (84 per cent vs 90 per cent), albeit within the IMD’s margin of error of ±8 per cent.

 

The spatial distribution of the 2015 monsoon has been unfavourable, with a substantial 39 per cent of the sub-divisional area receiving deficient rainfall. UP, Haryana, Punjab, Maharashtra and Karnataka are amongst the worst affected states. While UP, Haryana and Punjab were somewhat insulated on account of extensive irrigation coverage, below average irrigation in Maharashtra and Karnataka was inadequate to stave off the distress caused by scarce rainfall.

The prescience of the IMD prompted the preparation of contingency plans for a large number of districts across the country. This, in conjunction with recharged groundwater levels post ample rains in March-June 2015, ensured higher kharif sowing of most crops except cotton and jute relative to 2014 levels on a pan-India basis.

 

Moreover, a calibrated revision was undertaken in minimum support prices (MSPs), with bonuses offered to incentivise greater production of pulses. Responding to this price signal, planting of pulses has exceeded the 2014 area by a considerable 11 per cent. Moreover, timely decisions by the government to import pulses would boost domestic availability and ease the demand supply gap for this key food item.

The impact of low rainfall on kharif output of critical items such as foodgrains and oilseeds appears limited. The recently released first advance estimates of crop production for kharif 2015 forecast higher output for oilseeds and small shortfalls for rice and pulses, as compared to the fourth advance estimates of crop production for kharif 2014. Enhanced sub-soil moisture appears to have largely shielded yields of rice and oilseeds from the deficient monsoon. Belying the jump in area sown, the output of kharif pulses is currently expected to stagnate in 2015 at year-ago levels, indicative of a drop in yields.

 

However, output of other crops such as cotton, sugarcane and coarse cereals is expected to decline by a larger 5 per cent to 7 per cent. With low growth of MSPs of most crops, rural disposable incomes would remain under pressure, dampening sentiment.

Moreover, scarce rainfall has led to substantial drop in reservoir storage levels in the eastern, western, central and southern regions as of late-September relative to the year-ago period, which does not augur well for rabi planting. The rabi crop has gained considerable significance over the last decade, with a 17 per cent expansion in the area sown between 2001 and 2014, while the kharif area has stagnated during the same time period. As a result, area sown under rabi crops is now equivalent to over 60 per cent of the kharif area.

 

The somewhat delayed withdrawal of the southwest monsoon may provide a modicum of relief to the farm sector by replenishing groundwater levels. Nevertheless, the forthcoming rabi crop will remain vulnerable to the magnitude of rainfall in the winter and post-winter periods, particularly in areas with low irrigation coverage.

Post the unfavourable monsoon, farm sentiments are expected to remain muted in the near term. This would restrain rural consumption of big-ticket items as well as construction activity, resulting in modestly adverse spillovers into the rest of the real economy. 

 

Moreover, the central bank’s survey of urban households reveals that inflation expectations remain elevated in the aftermath of the sub-par monsoon, disregarding the easing of food inflation at the retail level that has benefitted from both effective food supply management as well as a favourable base effect.

Notwithstanding the uncertainty related to the final kharif harvest and the upcoming rabi season, risks to the food inflation trajectory are tempered by a variety of factors, such as adequate buffer stocks of wheat and rice, modest increases in MSPs and rural wages, as well as benign global food prices.

 

Additionally, the prices of pulses and onions should ease post the arrival of import shipments, which may help to assuage future inflation expectations and ease supply-demand mismatches. Nevertheless, improvement in irrigation coverage and investment in supply chains would provide a more sustainable buffer to the vagaries of the monsoon.

...




ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
-->