Will erratic monsoons hit the Kharif output this year?

More so, in the last 6 quarters, it is agriculture that has driven GDP with tepid performance from industry and services.

Aug 31, 2021 11:08 IST India Infoline News Service

After several years of average to above average rainfall, the indications coming from the IMD are that we could end up with deficient rainfall in 2021. July was around 7% below normal and August has been 26% below normal. That is not great news for an agricultural economy; still largely dependent on the rain gods. More so, in the last 6 quarters, it is agriculture that has driven GDP with tepid performance from industry and services.

IMD and Skymet warn of below normal rainfall

Data Source: IMD

A quick glance at the above chart conveys the message that the all-India rainfall is nearly 10% below the normal rainfall. That is a huge shortfall. What exactly is normal rainfall? The IMD defines normal rainfall as rainfall that is in the range of 96% to 104% of the long period average (LPA). Ironically, the rainfall was above normal in June but the dry spell in July and August took its toll on overall numbers. Only South India has received above average rainfall while all the other major regions are deeply in deficit.

The private sector weather prediction agency, Skymet Weather, has already downgraded the monsoons to below normal this year. However, the IMD is yet to give an official statement on deficit forecast. In India, it is not just the quantum of rainfall, but even the timing of the rainfall has a deep impact on the cropping patterns. Did this sub-par monsoon this year have an impact on Kharif output?

Kharif acreage trailed in the current year

Data Source: Agriculture Ministry

As per the latest data released by the Agricultural Ministry, all the crops have seen lower acreage compared to previous year, with the only exception being pulses. The all-important paddy (rice) crop was down 1.25% at 38.86 million hectare compared to the similar period in the previous year. On an overall basis, the Indian economy also has a larger base to contend with.

In 2020-21, total food grain output was 308.65 MT, which is 4% higher than the year before that. Comparatively, the total food grain output in the current year is expected to be 1.75% to 2% lower than the previous year. But, there is a bigger challenge that will now crop up.

Currently, nearly 87% of the Kharif sowing has been completed for this year. If the rainfall in September does not pick up, then that last part of the sowing could get impacted and food grain deficit could be steeper than 2%. The worrying part of the story is that this would put pressure on Rabi (winter) crop to make up for the shortfall in the Kharif output.

Why the pressure on Rabi crop will be higher this year?

If the government wants to match last year food grain output of above 308 MT, then the Rabi season will have to be extremely strong, the way it has been in the last 2 years. However, there are two constraints to the Rabi crop this year. While the first pertains to the late monsoon, the other pertains to reservoir levels.

With rainfall short by nearly 10% as of end of August, there is a huge shortfall to be made up in September and October if the Rabi sowing has to be robust. That has historically not happened when the deficit has been as high as 10%. So matching up to last year Rabi output itself may be tough, forget about bettering it.

The much bigger challenge is on the reservoir levels, a key factor for the success of Rabi crop. In the last 2 years, reservoirs were at optimal levels, resulting in a solid Rabi crop. However, this year the reservoir levels are much lower as you can see from the table.
Reservoirs in % of storage - 2021 % of storage - 2020 10 year average
North 49% 67% 77%
East 49% 64% 61%
West 56% 77% 62%
Central 60% 80% 72%
South 81% 80% 62%
All-India 63% 83% 96%
Data Source: Central Water Commission

To cut a long story short, reservoir levels across India are well below the 2020 levels and also compared to the 10-year average. South India is an exception, but the all-India picture is quite a telling story. Low reservoir levels can have a serious impact on the Rabi output during the current year, and that could be the primary challenge.

What does this mean for Indian economy?

There are 3 implications to watch out for

• Agricultural growth may contribute less this year as compared to the 3-4% growth in the last 2 years. The onus will be on industry and services to make it up.
• Food prices could become a casualty, which is a challenge considering that inflation is already sticky in the vicinity of 6%.
• Lastly, rising food prices may force the RBI to adopt a tighter monetary policy, which is a bigger risk at a macroeconomic level.

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