Economy looks set to bounce back but rains can play spoilsport
By all measures, India looks set to regain its place as an engine of global growth. Scattered evidence points towards early signs of a revival. So much so that the visiting International Monetary Fund (IMF) managing director, Christine Lagarde, described India as a bright spot in an otherwise stuttering global economy.comment Updated: Mar 18, 2015 23:47 IST
By all measures, India looks set to regain its place as an engine of global growth. Scattered evidence points towards early signs of a revival. So much so that the visiting International Monetary Fund (IMF) managing director, Christine Lagarde, described India as a bright spot in an otherwise stuttering global economy.
The government believes India will be able to grow at over 8% in 2015-16. The IMF has forecast that India will outpace China as the world’s fastest-growing major economy this year. Other think-thanks also expect likewise.
That said, India’s policymakers face a different challenge: Rain.
Freak and unseasonal rains can wreak havoc by damaging crops. Last weekend’s persistent downpour over 48 hours bears testimony to this. Severe weather triggered by a ‘Western Disturbance’ has caused extensive damage to winter crops ripe for harvest across north and west India.
Heavy rain and hailstones damaged standing Rabi crops in the countryside, which feed all major urban centres in the western and northern states. Rabi crops in at least 20 districts were destroyed while harvested grains in open markets were spoilt and reports suggest that only 10% of crops in these areas had been harvested before the hailstorms struck.
In Maharashtra, the surprise rains have hurt onions. The skyrocketing prices that had retailed at Rs 100 a kg in certain areas in 2013 are still fresh in people’s mind.
Like cricket, agriculture in India is a glorious game of timing. Without timely rain, saplings will over-age. Conversely, unexpected rain can severely upset the harvesting schedule.
The recent hailstorms could end up lowering the farm ministry’s production estimate of 257 million tonnes of food-grains in 2014-15, reinforcing a recent Food and Agriculture Organization report that the agriculture sector is most at risk from natural disasters.
When rain-dependent farm output is slow, rural income and therefore spending on almost everything go down. This reduces demand for manufactured goods, which, in turn, can hurt the overall economy’s growth.
Importantly, food items are most sensitive to supply and price shocks. Last week’s unrelenting showers can potentially push up the price curve steeply, hurt people’s spending power and affect recovery in the broader economy.
The government’s policy makers will also be keeping one eye on the monsoon forecast as deficient summer rains this year can deal a double blow.