The government expressed confidence on Wednesday that it could minimise the damage from a possibly deficient monsoon even as businesses expressed concern over a likely drop in rural spending.
Spelling out the government's plan, agriculture minister Radha Mohan Singh said a new crop insurance policy would be rolled out by the end of the year to protect farmers already struggling to cope with crop losses from unseasonal rain in February and March.
Singh said contingency plans were ready for 580 districts and higher import of pulses was being considered to help improve domestic supply. "In the agriculture sector, there will obviously be some losses ... We have confidence and policies in place to ensure there is minimum damage to the sector and the country's overall economy."
Confident about his ministry's preparedness, power and coal minister Piyush Goyal said there were adequate stocks of coal to fuel power plants in case hydro electricity output was hit by deficient rainfall.
"We have been planning for any eventuality and therefore, in the past two months, production by Coal India was raised by 11.8%," Goyal said. "Today, we have stocks that can run power plants for almost 20-22 days continuously."
However, indicating that the business sentiment could be affected in the wake of weak rural demand, the country's leading carmaker Maruti Suzuki said a poor monsoon would be a worry.
"Sales could be affected in some parts, especially in the
rural market," Maruti Suzuki India managing director and CEO Kenichi Ayukawa told reporters. He said the company would try to overcome the impact of a drought-like situation with product launches and market activation activities.
India is staring at its first drought in six years, with the government downgrading its monsoon forecast on Tuesday, sparking concerns about growth in Asia’s third-largest economy as it recovers from its worst slowdown in 25 years.
The weather office cut this year's monsoon forecast to 88% of the long-term average from a previous prediction of 93%, because of an intensifying El Nino weather pattern.
The country’s 700 million farmers are heavily dependent on the annual monsoon that runs from June to September. Any shortfall can have a direct bearing on spending on consumer goods from soaps to two-wheelers.
Anger is already mounting in the countryside after rain and hail ravaged farms, driving many debt-laden farmers to suicide. The arrival of the monsoon has been delayed by about five days, and the forecast of deficient rain has sparked memories of 2009 when El Nino brought the worst drought in four decades to India.