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Friday, Oct 18, 2019

Drought down under and your dal-roti

While the Sensex hits 16,000 points and investors get richer Ravi Srinivasan explores the ugly reality drought.

india Updated: Sep 19, 2007 20:47 IST


Drought is an ugly word in any language, anywhere in the world. Whether it is India's vast of rainfall-dependant agricultural tracts, or sub-Saharan Africa or even a highly developed nation like Australia, it ends up with the same consequences for everybody involved. For farmers everywhere, crop failure inevitably means debt, displacement and even the loss of their very identity and place in society. For consumers everywhere, it ends up meaning the same thing: higher prices for those who can still afford to pay, and hunger for those who can't.

Because the reality is ugly, we often choose to ignore it. It is much more fashionable, even comforting, to talk about surging growth rates and soaring stock prices. Especially when the talk, and the optimism are both perfectly justified. A near-10 per cent growth rate has visibly changed India, and pulled millions out of poverty. When the Sensex hit 16,000 points, lakhs of investors got richer.

Which is why I am worried about a little news item which has gone almost unnoticed here. On September 17, the Australian Bureau of Agricultural and Resource Economics cut its forecast for Australia's wheat harvest, one of Australia's major agricultural exports, for the current year by a whopping 31 per cent, to an estimated 15.5 million metric tonnes. Even this is heavily dependant on Australia's main agricultural area, the Murray-Darling river basin, receiving some rain this month and in early October. Chances of that happening appear pretty remote, at the moment. Australia is currently experiencing the worst drought in its history, a 'one in a millennium' drought. The output cut forecast, for instance, comes on the back of a 62 per cent drop in production the previous year, as Australia's 'long dry' enters its sixth year, with some regions having notched up a decade without rain.

So why should we worry about something happening on the other side of the world? Because, in a globalised world, the misery of the Australian farmer may well end up being felt, at least in part, by the Indian consumer.

India is the world's second-largest producer of wheat. But it is also the world's second largest consumer. For a few years, we had the curious phenomenon of India being both an exporter and an importer of wheat at the same time, because of our monumentally screwed up mechanisms for procuring foodgrains from farmers at a fair price.

This has resulted in traders procuring wheat from farmers, and exporting some, even as the official procurement agency, the Food Corporation of India, struggled to meet its procurement target, meant for building up buffer stocks and providing grain to the poor through the public distribution system (PDS). So the Indian government banned wheat exports for 2007, and has so far imported 1.3 million tonnes — mostly from Australia, at a far higher price than what it paid its own farmers.

Global wheat prices moved significantly when India announced imports. They shot up again, when Australia cut its crop estimate, which would, even in the best-case scenario, reduce its exportable surplus by over 50 per cent. Prices have already crossed Rs 15/kg levels on global grain exchanges. That's at the global, mega-deal level. Figure out what it would mean, retail.

And then spare a thought for the millions dependant on the tender mercies of our PDS.

Australia doesn't seem so far away, doesn't it?

First Published: Sep 19, 2007 20:35 IST

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