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The Monsoon Conundrum
Recurrent bad monsoons have not brought about policy changes that will shield India from shifting rains. Farm and food security remain distant dreams even in the 69th year of an independent India
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Raghuram Rajan is leaving the Reserve Bank of India, Britain is leaving the European Union and Lionel Messi is leaving the Argentine national football team. The one thing that cannot abandon us in 2016 is the monsoon. The NSG membership will transpire sooner or later but a bad monsoon will dampen the spirits of an economy buoyed by the exuberance of presumptive good rains. On his recent visit to India, World Bank chief Jim Yong Kim called India one bright spot in the world economy. India is indeed making constructive choices and policy directions but the economy’s link to the monsoon seems unyielding.
India’s monsoon obsession
Rexit and Brexit had transient, almost inconsequential effects on rather capricious stock markets of the country, an inadequate proxy for the economy’s health. The same markets soared after the forecasts of a favourable monsoon in April and a reassertion in May, adducing that the economy is biased towards monsoon performance.
Much of this dependence on the monsoon can be unravelled through a set of compelling numbers. Around 600 million people, almost half the country’s population depend on agriculture for their livelihoods. Only around 35 per cent of the cultivated area has reliable irrigation. Throw in the fact that almost 85 per cent of the farmers in India are small (between 1 and 2 hectare) and marginal (less than 1 hectare), the agrarian problem manifests to be warped beyond repair. The average land holding size stands at 1.2 hectares as per agricultural census data of 2010-11.
That roughly translates to about 510 million people reliant on inefficient farms (size) of which approximately 330 million are dependent on a vagarious monsoon. The spread of irrigation, population and land holding size may not be proportionate but this is as good a conjectural hypotheses as any other. To delineate the problem, we have about 330 million people whose livelihoods depend on farms that cannot sustain and rains that are never spot on.
The popular opinion, sadly even in the government is that a failed monsoon has no remedy. A bad monsoon will be followed by poor economic growth is fait accompli. India’s GDP growth fell in 2002 and 2004, both drought years. 2009 (another drought year) was saved by strong manufacturing and service sector growth despite fall in agricultural GDP. Records of monsoon rainfall and agriculture output corroborate an indelible impact of monsoon performance on agricultural GDP. Recurrent bad monsoons have not brought about policy changes that will shield India from shifting rains. Farm and food security remain distant dreams even in the 69th year of an independent India.
The idiosyncrasies of monsoon
The Southwest Monsoon is a four month period spread over June to September and is entrusted with ushering in an average of 89 centimetres of rainfall (as per 50 year averages) over the country in a normal year. India receives 76% of its annual precipitation during the Southwest Monsoon. The rains are not well distributed even in normal years as floods and droughts cut vast swathes.
India was overrun by three droughts in the past decade, in the years 2002, 2004 and 2009 respectively. In this decade, we have seen two back to back droughts in 2014-15, only third such event in 145 years of weather records of India that date back to 1871. This once in half a century event was preceded by a pronounced below normal monsoon in 2012. The country had witnessed consecutive droughts in recorded history first in 1904-05 succeeded by a similar event in 1965-66.
The country averaged two droughts a decade till the last century, a trend upended in recent times. There are five more monsoons to go to exacerbate the already impinged climate course. Climate scientists have been saying for a decade that climate change will foreshadow more extreme weather events. In essence, rainfall events will be more heavy and sporadic. The evidence is strong that monsoon does not fit into the scheme of a resilient, assured and booming Indian economy.
Structural weaknesses that need overhaul
Israel was given a patch of desert that tenacity, government spending, research & development and entrepreneurship turned into an oasis. Israel’s advancement in irrigation is especially noteworthy given the water deficient topography the country is situated in. India’s area under irrigation has trebled since Independence but it is a far cry from the requirement of this ever growing nation.
A robust canal based irrigation driven by interlinked rivers under the rubric of a water grid similar to the power grid can be a game changer for irrigation. The project of interlinking of rivers was actively taken up by the first NDA government but was then challenged in the Supreme Court. The apex court passed a judgment to continue the process in 2013 that only got initiated after the present-day NDA government came to power. The interlinking of rivers is likely to irrigate approximately 35 million hectares of arable land and produce 34,000 MW of hydro electric energy.
Indian agriculture is characterized by low productivity compared to even other developing countries like Brazil and China. For example, China grows 4.7 tonnes of Rice per hectare compared to around Brazil’s 3.6 and India’s 2.4. China produces 4.9 tonnes of Wheat on a hectare whereas India achieves a shade over 3 and Brazil a little less than 3. Both Brazil and China realize close to 1.5 tonnes of Cotton per hectare in contrast to 0.5 tonnes in India. Farm output nonetheless has grown steadily over the years but that has not alleviated the predicament of poor farmers. Abysmal post-harvest infrastructure including the deprivation from easy and economical access to storage facilities is a major cause of concern.
Bumper harvests usually spell doom for the farmers in the absence of minimum support prices for produce not covered under the government policy for procurement of food grains. Supply led price pressure often lead farmers to destroy their yield or sell it for a pittance. It is high time that the country allows significant investments in storage that were sidestepped for the fear of hoarding. The opportunity cost of a crackdown on such scrooges pales in contrast to the benefits to farmers in terms of better price realization.
India has been endowed with a marginally larger arable land compared to China even as the country’s area is roughly a third of China. Farm productivity across crops is however egregious compared to China. Chinese agriculture with a more disadvantageous average land holding size of 0.6 hectares is a miracle child of state investment in agricultural research & development, dependable irrigation and a differential crop mix. India can take a leaf out of the Chinese experience and re-evaluate its intransigent proclivity towards perfunctory subsidies and change tack to serious investments in rural infrastructure that would include roads, storage and irrigation.
India’s population growth has been on the decline since the late 1980’s but a large base population is steering the country fast towards overthrowing China from the podium of the most populous country in the world. The duo’s population growth rates last crossed paths in 1973 and China’s has been declining more than India’s ever since.
Population pressure on limited physical resources like agricultural land will only deteriorate already flagrantly inferior farm inefficiency and rural incomes. A major industrial thrust that would absorb a sizeable rural populace should be a priority. Agriculture’s share in employment has fallen remarkably from 74 per cent in 1972-73 to 51% in 2009-10 but is still less than the ideal of about 30 per cent of the population being employed in agriculture. Share of the industrial and the service sectors in employment stood at 22% and 27% respectively in 2009-10. Make in India has been launched amid much fanfare yet the government needs to find a way to channel a lot of rural energy in fuelling industrial growth under the aegis of constructive, targeted capacity building measures.
Monsoon progressing steadily
Blaring radios from spirited automobiles are playing iconic songs romanticizing the rain as the monsoon regained vigour. Monsoon rains have draped the entire country two days before its normal date.
The rainfall deficiency for the entire month of June nosedived to 6 per cent from a jittery 25 per cent in mid-June. Predictions were indicating a weak June to start with. But an economy with an undesirable vulnerability to monsoon is bound to panic with every variation from what is deemed normal.
Overarching policy correction in the agriculture sector led by rural infrastructure investments and encouraging employment shift towards a rapidly industrializing economy may present a panacea for both erratic monsoons and rural distress.