While the agriculture sector is already passing through a bad phase, the rainfall deficiency may have multiplier adverse impact on manufacturing and services sectors, a composite gauge for which today recorded a seven-month low figure.
As the spectre of deficient monsoon looms large, the government today announced a number of contingency measures to minimise the losses in agriculture and power sectors, safeguard farmers' interest and keep prices under check.
The downward revision to the monsoon forecast -- from 'below normal' to 'deficient' -- has already sparked drought fears, pushing stock markets into a freefall and raising doubts about economic recovery. The benchmark BSE
Sensex tanked over 1,000 points in the past two days, washing out over Rs 3 lakh crore in market capitalisation.
Besides, firms with significant exposure to agriculture and rural markets are fearing significant business losses.
While the agriculture sector is already passing through a bad phase, the rainfall deficiency may have multiplier adverse impact on manufacturing and services sectors, a composite gauge for which today recorded a seven-month low figure.
"In the agriculture sector, there would obviously be some losses if there are problems (of deficient rains). We have confidence and policies in place to ensure there is minimum damage to agriculture sector and overall economy," Agriculture Minister Radha Mohan Singh told reporters here.
The Minister said a new crop insurance policy will be brought in to protect farmers' income, while the government will take steps to improve domestic supplies through imports to check the price of pulses, which are already high.
Singh said the government is ready with contingency plans for 580 districts and is in touch with state governments and agriculture research bodies to tackle the situation.
Power Minister Piyush Goyal also said that the contingency plans have been drawn up to meet any eventuality in case the deficient monsoon hits hydro power output.
"It's a matter of concern that the monsoon is expected to be below normal, deficient. We are conscious that this will result in a fall in hydropower production and the demand will also increase... The Ministry of Power and the Ministry of Coal are seized of the situation," Goyal said.
The minister, however, sought to allay concerns and said that adequate coal is available at every thermal plant in the country to meet any shortfall in hydro-power output.
The Met department has revised its rainfall forecast from 93% to 88% for this year, with north-west region of the country expected to be hit the most.
Last year, the country had received 12% less rains, which hit production of grains, cotton and oilseeds.
According to the government's estimate, total foodgrains production has declined to 251.12 million tonnes in the 2014-15 crop year (July-June) from a record production of 265.04 million tonnes in the previous year.
Due to poor monsoon, agriculture growth stood at 0.2% in the 2014-15 fiscal.
A composite HSBC index for manufacturing and services sectors also fell in May to the lowest level in seven months.
The likely upward impact on inflation has also led to the Reserve Bank adopting a cautious approach. Yesterday, the RBI had lowered its overall economic growth forecast for the current fiscal to 7.6%.
"Power plants are ready to produce more. They have sufficient capacity in the system. Sufficient contingency plans have been drawn up," Goyal said, while adding that the the government would ensure that there was no power shortage in the country.
"I would only appeal to the state government to procure more coal so that their power plants do not shut down," Goyal said.
The Agriculture Minister expressed hope that the losses would not be huge.
Asked whether bad days are ahead for farmers, the Minister said: "Good and bad days can be man-made as well as created by the nature. The man-made bad days have ended and good days have begun..."
The government cannot stop natural calamity but it has the responsibility to face any eventualities, he said, adding that efforts would be made to reduce the impact of deficit rains on agriculture output.
Showing concern among the corporates, top carmaker Maruti Suzuki said that the deficient monsoon is a cause of worry and could affect sales in some parts of the country, especially in rural markets.
"Yes, the deficient monsoon prediction is a cause of worry. Sales could be affected in some parts, specially in the rural market," Maruti Suzuki India Managing Director and CEO Kenichi Ayukawa told reporters here.
The company's rural sales had increased by 23% to 4,15,380 units in last fiscal year, when it posted a total of 12,92,415 units -- the highest ever total sales in a financial year.
Ayukawa, however, said Maruti Suzuki would try to overcome the impact of the deficient monsoon with new product launches and other market activation activities.
Sales of a number of automakers, especially the tractor makers, are expected to take a hit from the deficient monsoon, while similar could be the case for other companies with exposure to the agriculture economy and rural markets.
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