Rainfall in August – Boon or Bane in Disguise

Monsoon has played truant in the current fiscal. To begin with rainfall was significantly deficient during June-July’2012, the first two months of the monsoon season. However, the good news is that there has been a sudden turn around and the rainfall has picked up pace from August onwards. The Indian Metrological Department (IMD) had earlier expected the country as a whole to receive below normal rainfall (<94% of Long Period Average) in its second half forecast for August to September. However, with the receding of the El Nino weather pattern, the rainfall is likely to be better in August, and possibly September.

Table 1: Rainfall in India (% deviation from LPA during period June 1 to August 22, 2012)

Source: IMD & FICCI Research
Note: LPA is long period average and condition of drought is <90% of LPA rainfall

Monsoon revived in most part of the country from the second half of August. A closer look at the table below show that states that received heavy rainfall in the third week of August include Punjab, Haryana, Rajasthan and Delhi. Maharashtra, Gujarat and Karnataka are the only states to have received scanty rainfall. Subsequently, the departure from the Long Period Average (LPA) in the third week of August was only 2% as compared to 29% departure in the month of June.

Table 2: Categorization of states as per rainfall received (August 15-22, 2012)

Source: IMD & FICCI Research

Region-wise the north western part of India received heavy rainfall in the second and third week of August. In the third week of August, 68% area of the country received excess/normal rainfall. Though rainfall was deficient in June and July, the pickup in rainfall in the month of August and expected good rainfall in September may compensate for the deficiency and bolster the Kharif crops. However on the flip side, fertilizer sales and area sown under major crops have declined significantly in the first quarter of the current fiscal. This may act as a dampener on agricultural growth going forward.

Table 3: Rainfall in % departure (Monthly) 2009-2012

Source: IMD and FICCI Research

The increased rainfall in August and also to some extent in September in the current fiscal is not surprising as it has been the trend over the last couple of years (refer Exposition 1). Interestingly, the changing pattern in rainfall has also been pointed out by IMD. In particular, the suspected structural shift is likely to impact the kharif crops and especially the rice. A study of the IMD also reveals the fact that monsoon will have fewer rainy days and the arrival will be delayed by 5 to 15 days in the next 100 years. This will eventually force to change the cropping pattern in the country.

Exposition 1: Rainfall received in the months of June, Jul, Aug & Sep

Impact on Food Prices

The south west monsoon accounts almost 75% of the annual rainfall in India. Exposition 2 reveals that the impact of deficient rainfall on the food prices is always felt with a lag. It is believed that food prices may go up in the next two-three months owing to poor rainfall in the first two months of the monsoon season.

Exposition 2: Food prices and rainfall (% departure from LPA), 2007-2012

On an average, the country imports 3 million tons of pulses as it produces 18 million tons and consumes 21 million tons. Drop in the production of pulses due to below normal rainfall in June and July this year may also result in increase in the imports and prices of pulses.

Drought Relief Package

The Central government has already announced a set of relief package for the drought affected states which include:

• A relief package of Rs 2000 crore
• 50% diesel subsidy to the farmers to save standing kharif crops. The subsidy burden is to be shared equally between states and Centre.
• Import duties on oil cakes were removed to boost the fodder supply to livestock.

The Ministry of Agriculture has also laid out a contingency plan for 320 districts in the states of Punjab, Haryana, Gujarat, Maharashtra and Karnataka. The Empowered Group of Ministers (EGOM) issued an amount of Rs. 450 crores to Maharashtra, Karnataka, Rajasthan and Haryana, under the National Rural Drinking Water Program. It has also been decided to issue Rs, 1440 crores for the drought prone areas under the integrated watershed management program.

As is well known, the fiscal position in FY2010 was far better than in the current fiscal, thereby limiting the room for a large drought relief package, in case the situation so warrants. Additionally, the introduction of a farm debt waiver scheme amounting to Rs 65000 crore in the previous fiscal (prior to FY2010) year budget had helped address the farmers’ woes in the 2009 drought year. However, the scope for reintroducing the farm debt waiver scheme seems to be constrained in the current fiscal.

Irrigation Facility

A well developed irrigation facility in a state reduces the dependency on the monsoon rainfall. Irrigation facility in the states of Punjab and Haryana covers 80% of the sown areas. However, the states of Andhra Pradesh, Karnataka, Gujarat and Rajasthan which accounts for 14% of the total kharif crop depend significantly on the monsoon rainfall.

There exists a huge difference in the geographical distribution of the irrigation facility in the country. The government needs to invest more in the development of the irrigation facility of the states, to limit the probability of crop failures.

On the positive side, the dependence of agriculture GDP growth on southwest monsoon has reduced in recent years (refer exposition 3), for example, historical evidence during drought years shows that while in FY2003, agriculture GDP growth came in at –7% YoY, the situation was much better in FY2005 and FY2010.

Exposition 3: Sensitivity of rainfall on the output

Top Image Source: exfordy