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Monsoon Mood Swings? India Untouched!

Posted in Finance Articles, Total Reads: 3183 , Published on October 29, 2012

Remember the ‘Famine 1975!’ - A bestseller by William and Paul Paddock which had created ripples throughout the world by their comments on the underdeveloped countries especially India. Their message was loud and clear “Let the (hopeless) Indians starve to death”. Humiliated by the inefficiency due to lack of advanced technology and inability to be self-dependent to feed the population drastic changes were implemented by then policy makers of Democratic Republican of India. Mr Monkombu Sambasivan Swaminathan led the crusade to make India self-sufficient by spreading the green revolution throughout India. Since then India has never looked back despite weak monsoons frequently.

Impact of green revolution -

So what led to the doomsday being averted?The modern practices in agriculture were implemented with newer technology. But the turning point was the introduction of high yielding variety of seeds which made the dependence on monsoon much less. The genetically modified seeds increased India’s production from 120 tonnes to 170 tonnes in a span of just one year. India also invested in agricultural universities to promote research in drought resistant seeds. Land reforms in that era resulted in the consolidation of small holdings which resulted in implementation of technology optimally. MS Swaminathan was instrumental in spreading the awareness rapidly regarding the ill effects of fertilizers and pesticides which eroded the quality of soil. New policies were implemented to make the credit supply for farmers easy and convenient. The cumulative effects of all these changes made sure India would not have to be completely dependent on monsoons in future.

Initially the food grain production did increase with the implementation of green revolution but after ten years it reached its saturation. The food grain available per person reached its peak at 480 gms per person. The consumption of protein rich foods which were not dependent on agriculture increased simultaneously with growth of India’s economy. Although the penetration of superior foods among the lower strata of population was still insignificant but the consumption among the higher end of the society increased considerably.

Implementation of PDS

The game changer however was the improved public distribution system. Monsoon in India is peculiar in the sense that the rainfall may be deficient in some areas whereas abundant in other. So the production also follows the same pattern being under target in the monsoon deficient areas whereas bumper production in the abundant monsoon areas. But the irony was that he food grain in the bumper production region were left to rot despite of the people starving in other regions. The rapid development of roads led to a better connectivity which ensures that the food grain output can be equitably distributed across India. So even if the monsoon being deficient in some areas the excessive output from other regions could be sent across to compensate or the low production.

Improved irrigation -

The dependence of agriculture on monsoon has declined over the years. Compared to 1965, when 67% of the agriculture was dependent on monsoon, only 40 % of the agriculture is dependent on rainfall today. The irrigation earlier was due to canals which were indirectly dependent on rainfall but now the irrigation is mostly by tube wells which are not dependent on monsoons. So a decline in monsoon won’t affect the production output drastically.

India traditionally produces two crops, kharif and rabi. Kharif crops are cultivated in the monsoons and rabi crops are cultivated in the winters. So kharif crops are dependent on, whereas rabi crops are unaffected by, monsoons. Earlier the kharif crops accounted for three fourths of the total output but in the contemporary scenario the output of kharif and rabi crops are almost equal. So a deficient monsoon may change the output of kharif crops slightly but the rabi output won’t be affected.

Inflation rendered ineffective -

Weak monsoon will fuel inflation due to the supply and demand mismatch. The increase in level of prices will have some effect on other commodities as well. Having said that, as per the the PDS scheme the population under the BPL gets 35 kg of food grain every month. So the poor won’t be affected much by increase in the food inflation

Effect on GDP -

India’s agriculture contributed to around 52% of the total GDP in 1950. The investments in the manufacturing sector as well as the rise of Indian services sector led to decrease in the share of the agriculture in India’s GDP. Presently agriculture contributes only 14% to the GDP. So even if the production decreases due to weak monsoon its effect on the GDP will be negligible. Even 7% drop in the output, though very unlikely would decrease the GDP by only 1 %.

Forex sufficiency -

Earlier India received foodgrains on charity - primarily from USA, Australia and Canada. But dependencies have been worked upon. Scenarios have been mitigated. Today, India has $300 billion as foreign reserves and has earned enough forex reserves to buy food grains in times of emergency. The current reserves of the food grain stands at 80 million tonnes, so a situation of import is highly improbable.

These all contribute as the major reasons which have ceased Indian-draughts & fickle monsoon conditions from being calamities anymore. Foodgrain availability remains as low as in the 1960s, despite the green revolution. But rapid GDP growth, by hugely boosting the share of services and industry in GDP, has made agriculture a relative pygmy, greatly reducing the economy's monsoon dependence. Yet when everything is said and read, things aren’t as rosy as we have depicted above. There remains a catch: a drought may no longer mean mass starvation, but it still means food inflation!

This article has been authored by Paraag Sabhlok & Abhishek Wadurkar from IIM Ranchi.

Image: FreeDigitalPhotos.net

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