The monsoon is here

Hope for positive economic effects must be tempered

Rarely has a monsoon been as eagerly awaited as it has been this year. Prolonged drought has depleted surface and ground water resources to historic lows, making it difficult even to meet drinking water needs in many areas. The adverse impact of the drought, coupled with a dip in rural spending, cuts across the entire economy — affecting, among other sectors, thermal power plants; automotive and some consumer goods industries; textiles; pulp and paper production units; beverages and agro-processing units; and a range of services. Many of these are operating at below optimal capacity. The overall economic cost of the ongoing two-year drought has been estimated by the Columbia Water Centre-India, a think tank on water-related issues, at an enormous $100 billion (approximately Rs 6.7 lakh crore). The revival of the monsoon can be expected to redeem at least a part – though certainly not the whole – of it. More importantly, it can help ensure higher growth.

A survey by the Confederation of Indian Industry (CII) indicates that the overall growth in gross domestic product (GDP) could well exceed eight per cent in 2016-17 on the back of, among other things, the release of pent-up rural demand. The agriculture ministry anticipates that the farm sector's growth would surge to over seven per cent, from a meagre 1.2 per cent in 2015-16 and an even lower 0.2 per cent a year earlier. The foodgrain output target for the current year has been pegged at 270 million tonnes, substantially higher than around 252 million tonnes in each of the last two years. More significantly, a good monsoon and consequential higher output can lower food inflation, which has now been hovering around six per cent or above (currently at 6.3 per cent). This would be crucial in allowing the Reserve Bank of India room for a rate cut.

However, euphoria on this count needs to be tempered a bit to bring it closer to reality — which is that the anticipated gains may take some time to materialise. Rural income will begin to accrue only after harvesting and marketing of the crops and part of it would go towards retiring outstanding debt. Moreover, going by past experience, the bountiful monsoon of the kind projected by the India Meteorological Department (IMD) may not be an unmixed blessing. Rains can bring in their wake dreadful floods, which require constant vigil by the Central and state governments. The country’s flood forecasting system, run by the Central Water Commission, has failed many a time to forewarn flood hazards. On the other hand, the anticipated plentiful monsoon also lends a valuable opening to collect and preserve rain water to meet future contingencies. Apart from measures to slow down run-off and refill reservoirs and other surface water bodies, action is needed also to steer rainwater down to safer and more capacious underground aquifers. Some spadework for it may, hopefully, have already been under way – at least in some states – as part of the drought relief efforts. More should be done in the next few weeks while the monsoon is in transit from Kerala to other parts of the country. This is an opportunity that must not be frittered away.