Monsoon blues: Poor rains likely to hurt agriculture output

  • HT Correspondent, Hindustan Times, New Delhi
  • Updated: Aug 30, 2014 09:17 IST

India’s economy may have recorded its fastest growth in nine quarters, but a lot depends on this year’s summer harvest that has been hit by patchy rains in the main cereal-growing states of Maharashtra, Karnataka, Rajasthan, Uttar Pradesh, Madhya Pradesh and Andhra Pradesh among others.

India’s agriculture output grew 3.8% during April-June this year, only marginally lower than the 4% growth recorded in the same quarter of the previous year.

Monsoon was 22% below average in the week to August 27, the weather office said on Thursday, recording a third straight week of deficit.

A good monsoon raises food output and improves farm income, which supports a third of Indians, or about 800 million people.

This in turn aids growth, boosts jobs and investments and creates demand for manufactured goods, which, in turn, helps the general economy.

A sharp rise in rural consumer spending explains why India’s markets in India’s hinterland are important.

For instance, rural buyers account for close to 40% of India’s total motorcycle sales. Likewise, about 40% of India’s cement demand comes from rural housing.

The rains are crucial also to tame prices, which have remained persistently high.

India’s retail inflation, a measure of actual shop-end prices consumers pay, rose to 7.96% in July from 7.46% in June, while factory output growth slowed to 3.4% in June from 5% in the previous month, dimming chances of a sustained recovery.

Retail prices of almost all everyday products and services — from food to footwear and movie tickets to medicines — surged in July, signaling inability to control household inflation, partly stoked by a sharp rise in food prices.

Consumer food price inflation (CFPI), a measure of how costly the platter has become, galloped towards the worrisome double-digit mark at 9.36% in July, a sharp rise from the previous month’s 8.05% increase.

The devil of the fresh price indices lay in its detail.

On a year-on-year basis, vegetable prices grew 16.88%, while fruit prices recorded the sharpest increase at 22.48%.

Prepared meals’ prices — a proxy for restaurant meal rates — rose 7.77%, primarily because of soaring vegetable rates and high rental costs.

This isn’t good news for households with the Reserve Bank of India (RBI) holding interest rates at high levels to tame inflation. Consequently, equated monthly installments (EMIs) on home, car and personal loans also remain high.

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