In Drought, India's Economy is Feeling the Heat

[BanglaBhoot]

By JYOTI THOTTAM / NEW DELHI Sunday, Aug. 23, 2009

India's drought is drying up consumer demand in rural areas, and the entire economy is feeling thirsty. It begins with people like Kalu Singh. A prosperous farmer in the northern state of Uttar Pradesh, Singh has built a tiny empire — a microcosm of the Indian economy — around him. He owns 144 acres of vegetable plots and paddy fields and last year earned almost Rs. 2.2 million (about $45,833). That's enough to employ more than 1,500 people and for him to live well, spending about $625 a month buying clothes, food and comforts for his family of nine in the village of Salarpur, less than six miles from New Delhi in the northern state of Uttar Pradesh.

But this year, the monsoon has failed here — as it has in nearly half of India's districts — and his land, which would normally be full and green in August, looks worn out. "This year I doubt I will be making more than Rs. 400,000 (about $8,333)," he says. "I have had to cut back on many things. I felt really bad when I couldn't even buy my grandchildren new clothes for a family wedding." Salim and Ahis Ahmed, two brothers who lease about half an acre from Singh, have also seen the drought shrink their usual income of Rs. 20,000 ($416) for every three-month growing season by half. "We were saving up for a motorcycle," says Ahis Ahmed. "It would have made our trips to the markets easier. Now it's not possible anymore."

Those small decisions — the motorcycles and new clothes left unbought — add up for retailers. Ombati and Rajinder Singh run a grocery store in Barola, another village in Uttar Pradesh, and their customers are mostly farmers. "People are not buying in bulk anymore. They come and buy things in limited quantities," Ombati says. That change has reduced their daily earnings from Rs. 2000 ($42) to Rs. 600 ($12.50). "In a drought, where is the money to buy things?"

The Indian companies who make those products, and their shareholders, will soon ask themselves the same question. A recent report from analysts at Bank of America/Merrill Lynch in Mumbai projects "a 10 to 15% pullback in equities led by drought-led growth cuts." Every major drought in India has a pervasive impact on the economy, which is unlikely to meet the government's projected 7% GDP growth this year. (Analysts expect 6% or less.) With crops failing, food prices will go up everywhere, pushing up inflation. Mohammed Nadim, a vendor in Hoshiarpur, says the wholesale price of his cartful of sweet corn, red cabbage and peppers has tripled over the last few months. Electricity production also will be lower in areas that rely on hydropower, reducing industrial productivity. "It's not about business alone," says Suhel Seth, a marketing expert and longtime advisor to India's big business houses. "You're creating a chain of events which affects the whole economy."

Drought is no stranger to India — the monsoons, which are especially crucial for areas without irrigation, also failed in 2002 and 1987 — and the government is responding in the usual way, by expanding rural subsidies. In his Independence Day speech to the nation on Aug. 15, Prime Minister Manmohan Singh promised to postpone the date for repayment of farmers' bank loans and to give breaks on interest payments for short term crop loans. This comes on top of last year's $14 billion farm loan waiver program, price supports for agricultural products and an ambitious jobs scheme, which guarantees 100 days of work to the poor in rural areas. "There's only so much that any government can do," says Indranil Sengupta, an economist at Bank of America/Merrill Lynch. "When you look at the scale of human suffering, whatever you do will look inadequate."

Even if it can't buy rain, there is still time for the government of India to rethink how it can start to prepare for the next drought. Sunita Narain of the Centre for the Study of the Environment in New Delhi advocates a new, national water policy to make farmers less vulnerable to the vagaries of the monsoon, encompassing more effective use of groundwater, better monitoring of weather patterns and water supply, implementing village water-security plans, and encouraging conservation and water recycling in the cities. In a recent editorial she wrote, "We must learn, fast, how to reinvigorate our water policy keeping in mind the two big changes — more variable rainfall and desperately growing water needs." Seth believes farmers need not just more handouts, but better access to low-interest credit, so they don't have to rely on moneylenders in every lean year. It was this crushing debt that caused a rash of farmer suicides in 2007.

One way or the other, the problems of drought-hit rural areas will eventually become those of India's metros. If things don't improve, the Ahmed brothers say, "We might not even be able to afford this land anymore." But they have a plan. They have started asking around about work as laborers on a construction site, and may soon make their way to the city.

In Drought, India's Economy is Feeling the Heat - TIME

 

[kallu_be]

Rainy season is not yet over, monsoon has picked up this week and hinterlands are receiving good amount of rainfall, lets wait until mid sep before drawing any conclusions.

Latest satellite img

http://www.imd.gov.in/section/satmet/img/sector-ir.jpg

 

[BanglaBhoot]

Drought-hit India will import food to meet shortage

Business News

Aug 21, 2009, 9:00 GMT

New Delhi - The drought situation in India was extraordinary and the government would import items in short supply, Finance Minister Pranab Mukherjee said Friday.

'The decision is already there that whichever commodity will be in short supply, to maintain demand-supply mechanism, we will go for imports,' Mukherjee said while addressing a meeting of state agriculture ministers in the Indian capital.

'We have developed a certain expertise to handle drought. We will not publicize the government's plans to import food,' he said.

'The moment news is spread that India is going for big imports, the market prices are jacked up,' he said.

News of the drought in India had already pushed up sugar prices in the international market. India is the world's second largest sugarcane producer after Brazil.

Mukherjee also said the drought could impact the economy and inflation. 'Drought does not affect only crop production it has a cascading effect,' he said.

India announced on Wednesday that 246 of its 626 administrative districts were drought-hit after insufficient monsoon rainfall.

Many of these districts are among the top rice-producing regions in the country.

'The drought situation is difficult. It is an extraordinary situation,' Mukherjee said.

It was critical to save standing crops and provide alternative crops to farmers who have lost their crops, federal Agriculture Minister Sharad Pawar said at the meeting.

Sowing of the winter crop should be done early as there had been some late monsoon showers, Pawar told the state agriculture ministers.

'The situation is grim. Not just for crop sowing and crop health but also for sustaining animal health, providing drinking water, livelihood and food, particularly for the small and marginal farmers and landless labourers,' Pawar said.

More than 700 million people in India depend on agriculture and allied activities for their livelihood.

Farming in India is heavily dependent on the seasonal monsoon rainfall which comes from June to September. It is estimated only 30 per cent of India's farmland has access to irrigation.

The month of September was critical, Ajit Tyagi, director general of India's Meteorological Department, said.

A revival of the monsoon over the past week could be promising for the winter crop, although it was too late for the summer crop, Tyagi added.

Mukherjee said India had started the drought year with good food grain buffer stocks.

According to the government's estimate, India has enough buffer stocks to cover any shortage for a period of 13 months.

Uttar Pradesh, Madhya Pradesh, Karnataka, Bihar, Assam and Manipur are the states worst affected by the current drought.

Drought-hit India will import food to meet shortage - Monsters and Critics

 

[kallu_be]

Straight from agriculture ministry

Drought: Have enough food stock for 13 months, says Pawar

There will be shortfall of rice but one need not worry because in last two-three years, continuous efforts were made by the Agriculture Ministry, which had active cooperation and coordination from the state government and machinery agricultural universities. That is how we improved the production and productivity of rice and wheat. We gave extra prices in the last two years and we have seen the benefits of these actions. Today we have procured the highest wheat and rice, which we have never procured that level in last 60 years.

The government of India today has a stock of next 13 months of wheat and rice and so though the area under rice has come down, people of our country should not worry about availability of rice and wheat. In fact, yesterday I called a meeting of state food ministers from states — there were at least four-five food ministers from Punjab, Haryana, Chattisgarh, Andra Pradesh — they asked us to either vacate the state warehouses, which are full of rice or shift it rice elsewhere because the new season will start in 45 days.

We have alternative plans too. We have also prepared for other types of crops if the rains fail. Seeds and all types of support were kept for farmers and the state government. Tomorrow, I have called all state ministers of agriculture and my agenda is how to compensate with the rabi and summer crops whatever we lost in the kharif. We should concentrate on bringing more areas under the rabi and summer crops, especially those areas where there are good water reservoirs. We plan to work on utilizing every drop of water from reservoirs and improve the production and productivity.
.......

I think politicians should make up their mind and think before releasing statements to public.

 

[ratolz]

If in any case india imported the food, it will allow the prices in international market to jump higlhy. But i think somehow it will effect on GDP as growth rate of agriculture will fall.

 

[BanglaBhoot]

India's farmers struggle without crucial monsoon rains

Average rainfall dropped 29 percent from June to mid-August – prime planting season for India's 234 million farmers. It's the worst monsoon season in years –though an increasingly diverse economy will ease the overall impact.

By Mian Ridge | Correspondent of The Christian Science Monitor
from the August 25, 2009 edition

Bamheta, India - The only thing growing in Jayabati's parched field this summer is a mound of cow-dung bricks that, once dried and hardened, will be used as cooking fuel.

"No rain, no planting," says the weary-looking woman, who goes by one name, as she stands on the tiny plot of land she farms with her husband in the northern Indian state of Uttar Pradesh.

Like most of India's farmers, Jayabati has no access to irrigation systems. She depends entirely on the monsoon rains that fall between June and September to water her staple sorghum crop.

This summer, the rains have stayed away.

India is experiencing its worst monsoon in years. Though a bad monsoon is less damaging to an economy that is diversifies away from agriculture, it is making life tough for India's 234 million farmers.

Driest June in 80 years

Summer showers account for 80 percent of the country's annual rainfall but from June to mid-August – India's most crucial planting period – they were 29 percent lower than average, says India's meteorological department. In Uttar Pradesh, they were down more than 60 percent. The month of June was the most arid in India in more than 80 years.

Rice, the biggest crop sown during the monsoon, has been worst hit, along with sugar cane and oilseeds. Though rainfall has improved in some areas in recent weeks, it has come too late for many crops, which require an even sprinkling of rain throughout the sweltering summer. Some fear that heavy showers now could damage already reduced crops of sugar cane.

"It's too late to plant most crops now," says M.S. Swaminathan, an agriculture scientist who is described as the father of India's green revolution, a movement in the 1970s that brought high-yielding seeds and an increased use of fertilizers and pesticides to India. He describes this year's monsoon as "a calamity."

Fresh rainfall may prove more helpful to winter-sown crops such as wheat and rapeseed, which depend heavily on water from reservoirs. Indeed, the government is encouraging farmers to plant more winter crops to mitigate the effects of an awful monsoon.

Economists look to the skies

The country's economy remains closely tied to its fickle summer rains, even though its technology boom makes more headlines.

Agriculture accounts for 18 percent of the country's total gross domestic product. But more significantly, it employs more than half the 1.1 billion-plus population. And many rural Indians seem certain to curb their spending on goods and services this year.

A bad monsoon can also reduce power production: Hydropower provides a quarter of India's electricity. In 2002, when monsoon rains were down 19 percent, GDP growth slowed from 5.8 percent to 3.8 percent.

Still, the Indian economy is becoming less dependent on agriculture. In 1990, the sector contributed 30 percent of GDP. This year, a more diversified economy will be especially helpful in offsetting the effects of a dismal summer: Industrial output in June surged to its highest rate in 16 months, rising nearly 8 percent over last year.

"Agriculture is a much smaller part of the economy now, and India appears to be in a recovery phase," says Surjit Bhalla, an economist.

Still, like many economists, he has shaved a percentage point off growth estimates for the year, to between 6 and 7 percent, due to the impact of poor weather. The government, meanwhile, has said it has enough food stockpiled from two years of bumper harvests to prevent high inflation.


Few alternatives for farmers

For farmers, though, the effects of a poor monsoon are as disastrous as they ever were. Most are smallholders, who fall easily into debt, and a dry summer can mean ruination.

Last week, the government raised the minimum purchase price of rice and said it will increase food subsidies to rural areas and allow farmers to delay paying bank loans. It is also considering pumping more cash into a rural job initiative that guarantees 100 days of employment to every poor rural household.

Last year, the government spent nearly 700 billion rupees ($14.4 billion) on waiving farms loans for impoverished farmers. It has said that this year includes no such plan.

But whatever measures the government takes, Indian farmers are suffering this summer.

Mr. Swaminathan says one of the first signs of "extreme distress" among farmers – an increase in cattle sales – is visible throughout the country.

In Uttar Pradesh, when asked about the weather, farmers talk first about their cattle.

Shivrani Sharma, who farms just over an acre of land with her extended family, says her herd of 10 buffaloes is becoming "diseased," a euphemism for starving.

"We have no food or water to give them," she says, adding that she will soon have to consider selling livestock "before they die."

The farming population has also seen an increase in suicides. Up to 15,000 farmers have committed suicide over the past decade after falling behind in payments to money lenders, according to the Tata Institute of Social Sciences.

Says Swaminathan: "I'm afraid we're seeing a sharp increase."

India's farmers struggle without crucial monsoon rains | csmonitor.com