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4 States, 5 Crops At Highest Risk This Monsoon

Thursday, August 20, 2015
By A Business Reporter

Vulnerabilities unaddressed for long are amplifying farm stress, cautions Crisil

India “has suffered weather-related turbulence for years but what is worrying is that with rising frequency of such events, the impact is getting increasingly amplified because holistic efforts to reduce structural vulnerabilities are lacking. We believe investing in Indian agriculture’s future has become economically and politically critical. The government needs to change the templates, and quickly so,” says Dharmakirti Joshi, Chief Economist, CRISIL.

He was referring to an analysis of rainfall data till August 16, 2015, using CRISIL’s Deficient Rainfall Impact Parameter, or DRIP, which shows four states -- Bihar, Karnataka, Maharashtra and Uttar Pradesh -- and five crops -- jowar, soyabean, tur, maize and cotton – are most hurt by deficient rains.  These states contribute 34% to total foodgrain production in India, while jowar, soyabean, tur and maize tot up 26% of the total foodgrain and oilseed output.

DRIP captures the interaction between the most critical aspect of vulnerability (irrigation) and weather shocks. DRIP scores help identify crops and regions hurt relatively more by weak rains.

This fiscal, the importance of monsoon, and therefore agriculture, is magnified because the non-farm part of the Indian economy has been struggling, as underscored by poor investment and manufacturing activity. If monsoon ends up being deficient overall this fiscal, too, it would mark two failures in a row, which will be harder to deal with.

Angsty Farms, CRISIL’s report released yesterday, looks into the vulnerabilities plaguing India’s farm sector by devising an agriculture-risk matrix. This gives a fair indication of who is swimming how by measuring state-level vulnerabilities on four parameters: dependence on agriculture income, indebtedness of households, extent of irrigation, and crop insurance cover.

It also finds that input and output price movements have been quite unfavourable to the farming community. The last few years have seen a sharp rise in wages and other input costs, while the increase in output prices was restrained, which reduced cultivation income and hit profit.

“The recent fall in rural wage growth has hurt those on the fringes. For the record, small and marginal farmers constitute about 70% of India’s agricultural households and they depend more on wage income compared with large farmers who enjoy cultivation income,” Joshi said.

CRISIL maintains its overall GDP growth forecast of 7.4% for fiscal 2016 with agriculture growing at a sub-trend rate of 1.5% on a weak base of last fiscal. The Indian Meteorological Department expects the second half of the monsoon season to be worse than the first. Any positive surprise on rainfall over the next 45 days can create some upside to the growth outlook.

Last year, India managed to put a lid on food inflation despite monsoon failure because of proactive steps taken by the government such as showing fiscal restraint, offering muted increase in minimum support price, deploying food stocks, and cracking down on hoarding.

India may succeed in putting a lid on food inflation this year, too, even if monsoon is not supportive. But repeating the feat every year is impossible without structural, holistic improvements in agriculture to address the vulnerabilities,believes CRISIL.

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