Kamal Ghorui
Good news is that, despite Iran war and energy crisis, India’s economy is not in hot water. But agriculture, which still makes up about a quarter of GDP, may have to skim warm water later this year. IMD has predicted a weak monsoon, due to El Nino effect, which is caused by warming of Pacific Ocean.
Whenever that happens, every few years, summer rainfall over India suffers. IMD’s predicted the country, as a whole, will get 92% of “normal” rain, which doesn’t sound so bad, until you read the fine print.
First off, per IMD’s forecast, monsoon is more likely to be “deficient” than “below normal” this time. This has been the case in most El Nino years. And the difference is significant: in a “deficient” monsoon, rainfall is less than 90% of long-term average.
Secondly, rainfall distribution is not uniform across the country. For example, 2024 was a good monsoon, yet, key agricultural states like Punjab, UP and Bihar got less rain. Even in a “deficient” year, some parts may get surplus rain, some may be near-normal, while the rest could have acute dry conditions that make farming extremely challenging.
It’s a fact that much of Indian agriculture remains rain-fed, and monsoon provides 70% of moisture for farms. In states like MP, half of wheat acreage is rain-fed. In Maharashtra, rain dependence rises to 80%.
Production of pulses, an important source of protein in India, falls in every El Nino year, sometimes by more than 25%. Ground water levels fall, as farmers run tubewells longer.
Meanwhile, there’s less water in reservoirs for irrigation and power generation. This year, the challenge is tougher because unseasonal rain damaged standing crops over lakhs of hectares in March-April, and Iran war has shrunk supply of fertilisers. What else? If war continues, diesel might become costlier.
It’s not quite the Goldilocks story we heard at the start of this year, but look at the bright side. An S&P analysis shows India’s banks and businesses are in good health.
In the worst case, crude at $130 over the year may shave off 0.8 percentage points from GDP growth. But crude has mostly tended below $100 over the past week. Last year, agriculture acted as a “stabilising force” on the economy. This year, if farmers need help, govt should step up.
Although there’s a chance that formation of a different climate phenomenon, called “Indian Ocean Dipole”, could cancel out El Nino in Aug-Sept. We can use a miracle.
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