How does a weather anomaly in the Pacific Ocean put the fear of god into the minds of both mandarins in North Block (that houses the Finance ministry) as well as the honchos of India’s biggest companies? And how does this ‘wind’ signify life or death to millions of rural folk across India?
The US weather agency a few days ago had forecast that El Nino, a weather formation that pushes warm waters from the equator towards the Pacific region of South and Central America leading to less than normal rainfall in India, could set in as early as June this year.
In other words, El Nino could weaken the crucial southwest monsoon, the ‘life giver’ so to speak for India’s agriculture. Coming on the back of the Covid-19 pandemic, Ukraine war and subsequent inflation, a weak monsoon could spell catastrophe for India’s already struggling rural sector.
No sweat, even a 10 per cent reduction in the quantity of monsoon rain water caused by the El Nino effect could lead to a drought across the Indian mainland. And up to 60 per cent of India’s cultivable land depends on the southwest monsoon for irrigation.
Agriculture contributes to 20 per cent of India’s GDP, besides propping up rural India where about half of India’s population resides.
That’s disastrous news for not just the government making best-case predictions for the economy after weak GDP rates recently. “Soft rural demand, slowing hiring and moderating consumer durable sales are stoking concerns about demand in the economy,” said Mitul Shah, head of research (institutional desk), Reliance Securities.
“The prediction of a heat wave in March ahead of the Rabi harvest and initial forecasts of a below-normal monsoon this year due to El Nino is further adding to concerns about food inflation and fall in rural incomes,” Shah added in a pre-market note on Monday.
Already, hotter than usual February temperatures could have a debilitating impact on Rabi crops, which means food prices could spurt during the summer. The Kharif crops crippled by less monsoon waters will turn out to be the last straw.
The Finance Ministry has released a statement that the predictions of a return of El Nino conditions in the Pacific could presage a weaker monsoon in India, resulting in lower (farm) output and higher (food) prices.
That is ominous, considering that India’s chief economic advisor V. Anantha Nageswaran recently flagged the need to be ready with both supply side and monetary policy measures suppose the monsoon turns out to be deficient.
The impact could be deadlier for rural sector. The CEA had already warned of urban demand recovery taking place at a faster pace then rural post the pandemic. This along with sharp slowdown in private consumption expenditure to a 2-year low suggests a softening in household spending demand amid inflationary pressures, as post-Covid pent-up demand starts to fade.
Now the private sector is also pressing the warning bell. Take the automobile sector, for example. Sales have just about stabilised in recent months—February sales figures released by the Federation of Automobile Dealers (FADA) show double-digit growth in most categories, with prospects for March and April also good, thanks to festivals and the financial year ending. But will it last into the monsoon season?
"While auto sales look good (presently), on a medium-term outlook, (we) remain cautious till the time a better monsoon forecast is not announced by the Met dept," according to a statement released Monday morning by FADA.
