Yes, it’s a drought

The government on Thursday confirmed India has been hit by a drought with rain gods playing hide and seek, especially in the country’s north western bread basket. Agriculture minister Sharad Pawar declared 177 out of 626 districts as “drought-affected”, raising fears of lower crop production. Deficient rainfall has already set the alarm bells ringing in the corridors of power.

How deficient has the monsoon been?
Rainfall has been 56% less than average in the week ended August 12, India Meteorological Department (IMD) director S Kaur told Bloomberg on Thursday. India received 27.4 mm rain in the period against the average of 62.7 mm, Kaur said in New Delhi. Thirty-one of 36 weather divisions have got deficient or scanty rain with the shortfall increasing from last week’s 25% to 29%.

“Sub-divisions with deficiency of 50% or more include west Uttar Pradesh (-67%), Haryana (-64%), Chandigarh (-64%), Delhi (-64%), Telangana (-60%), east Uttar Pradesh (-53%) and Rayalaseema (-50%). Rainfall deficiency in the meteorological sub-divisions of northern/Indo-Gangetic plain is 26-67%, with UP, Haryana and HP badly affected,” an HDFC securities note said on Thursday.

Monsoons are also likely to withdraw ahead of schedule in mid-September instead of early October, another weather official said in New Delhi.

D Sivananda Pai, the IMD director, long range forecasting, said the monsoon’s early withdrawal is likely to have an early impact on the winter (rabi) crop too, besides the damage it has done to the kharif crop.

What does this mean for food prices?
Food prices, already high, could rise and lower production in the rabi season could push them further up. Sonal Varma, India economist with Nomura Securities, said rice, groundnut and sugarcane have been the worse affected so far. However, high stocks of rice and wheat with the government may make the situation simpler.

“Kharif production for rice is down 20% but we have over 57 million tonnes of rice and wheat stocks; so the government, if it really wants, can sell these stocks on the open market to cool the prices. However, since groundnut and sugarcane production is also down, we don’t have buffers for those crops,” Varma said.

Economists said calculations on the impact on growth are difficult because there are too many government schemes that could support rural demand.

Higher government spending in rural areas through the National Rural Employment Guarantee Act (NREGA) and higher minimum support prices for crops may also cushion growth. Varma has kept her 6.3% forecast for growth in 2009-10 unchanged.

Groundwater level lowest in years
India’s groundwater tables are possibly at their lowest levels in years, especially in the irrigation-rich states of Punjab, Haryana and parts of UP, scientists said on Wednesday. Economists say the highly irrigated states may still manage to produce crops, but prices will be higher because farmers will have to spend more on irrigation.

Next three weeks crucial
Subir Gokarn, Standard & Poor’s chief economist, Asia Pacific, said the next three weeks are crucial for monsoon revival.

‘If we have reasonable rainfall then we can expect some recovery, but if it doesn’t happen then we have what we got. Rain has been less in the northern areas but cultivation hasn’t stopped because that area is well irrigated, that’s why I am a little cautious about giving a doomsday alert,” he said.

With agencies