Fear of inflation with drought in a fourth of India

  • Gaurav Choudhury & Zia Haq, Hindustan Times, New Delhi
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  • Updated: Aug 12, 2009 11:02 IST

The spectre of a failed monsoon has heightened concerns about food supplies and left the government groping for options to sustain growth.

<b1>On Tuesday, the Agriculture Ministry held a videoconference with five of the states hit the worst by a drought that now spans across more than a quarter of India’s 626 districts, said NB Singh, secretary in the ministry. Separately, the Consumer Affairs Ministry asked four state-run companies that trade in food items to expedite import of pulses, which have seen the sharpest spike in prices in the past one year.

As many as “161 districts have been declared drought-affected. As far as sowing is concerned, 20 per cent would be down,” Finance Minister Pranab Mukherjee told reporters on the sidelines of a conference with tax officials.

While many of these districts are not major crop producers, the minister’s statement underscored growing concern that a weak monsoon could reduce output of crops like rice and dampen recovery of the broader economy from the impact of a global recession.
After the driest June in 83 years, this year’s monsoon — which brings rain to the Indian subcontinent between June and September — has so far fallen short by more than quarter of the usual amount.
The meteorology department on Monday cut its forecast for the third time, saying monsoon would bring only 87 per cent of the usual rains this year. The monsoon is crucial for sowing of summer crops like paddy as nearly 60 per cent of the country’s farmland has no access to irrigation.

"A terrible situation has arisen due to the failure of monsoon in the country. The prices of common man’s food like dal are going up. The work should be done in the spirit of patriotic duty,” a Supreme Court bench headed by Justice Markandeya Katju said while hearing a public interest petition on water crisis.

In Mumbai, prices of pulses such as arhar and tur have increased 77 per cent from a year ago and 11 per cent from a month ago respectively.

Sugar now costs 35 per cent more from a year ago, while potato prices are up 89 per cent from August last year. There are signs of milk and egg prices firming up as fodder prices come under pressure.

Mukherjee said the administration was equipped to handle the problem. “There is no point in pressing the panic button,” he said. “This country managed the century’s worst drought in 1987. We transported drinking water through railways. We organised fodder for the cattle.” In 1987, the country received 29 per cent less than normal rainfall in July, affecting sowing across 6,500 villages and resulting in 7 per cent contraction in kharif crop.

The finance minister said GDP growth this year would still be more than 6 per cent -- a figure that might shine in comparison to economies elsewhere in the world, but not enough to pull millions of impoverished Indians out of poverty.

It is also sharply lower than the 9 per cent growth than the economy average between 2004 and 2008, before slowing down to 6.7 per cent in 2008-09.

“The poor monsoon clouds the near-term outlook. Our growth expectations for 2009-10 remain at 5.8 per cent,” said Tushar Poddar, economist at Goldman Sachs.


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