Cracks in the earth tell a distressing tale

Now is the summer of our discontent, made inglorious by power trips and monsoon failures. The former affected 60 crore Indians on July 31 and the latter will continue to haunt a like number (though not entirely overlapping) in the weeks to come.

The power czars were quick to disown their abject failure to manage the grid after the outage and the pooh-bahs of the India Meteorological Department (Met) were grandly telling us that they were aiming to crack the monsoon code, even as their forecast of a near-normal rainfall this year was coming unravelled. They have finally been made to retract it, probably not so much by ground realities (which they appear to ignore) but by policymakers such as the Union agriculture minister, Sharad Pawar, who learnt their lesson in 2009 that ignoring early warnings of impending disasters costs them dear.
Why the IMD gets it all wrong when it comes to weather predictions is a long story and I have grown old telling it over and over again, not that it has made any difference to the department with a `350 crore annual budget, many mandarins with grand titles and fancy equipment worth thousands of crores. Long-term monsoon forecasts is an obsessive tale told by the Met department, full of sound and fury, signifying nothing. The Met bravely attempts to make precise forecasts three months in advance of events whose causes would not be known until three weeks before their occurrence! Mother nature does not know what weather she will provide us more than three weeks ahead, but the Met bravely attempts to tell us in April what the monsoon from June to September has in store for us. But it cannot tell us accurately whether and how much it will rain in the next couple of days. For the last many days, the Met has predicted daily rainfalls of about 30 mm for central Gujarat, when it has barely rained at all. So much for its “dynamic” ensemble models (which are supposed to factor in actual events) that leave farmers and administrators either high and dry or sopping wet.
This column is not really about the myriad shortcomings of the IMD, but more about the grim prospects in store at least for the western half of the country. Close to 60 per cent of India has had less than 80 per cent of the normal rains as of the end of July with not much hope for improvement in August and September. One fears that 2012 may not be much different from 2009 when the monsoon precipitation was only 77 per cent of the average. This year, however, the government appears a little better prepared, as some drought relief measures have already been set in motion by the empowered group of ministers.
Large buffer stocks of grain will ensure that there will be no mass starvation (this did not happen in 2009 either), even if a fair proportion of the stock is not in good condition. In theory, these stocks should also help avoid a rise in their prices but that would require quick and effective action to release them. That has not yet happened and the prices of all agricultural commodities have started rising well before any official announcement of drought anywhere. That is ominous.
While all those dependent on agriculture — one in two Indians — will face hardships on account of the drought, those at the bottom — the small-holders, agricultural labourers — will suffer far more. The rural development minister, Jairam Ramesh, has done his homework and his assurance that the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) would be suitably augmented to cope with the task of providing relief is most welcome. Rajasthan was the worst sufferer of the drought in 2009. While conducting an official review of the 11th Five-Year Plan in that state, I found that the MNREGS provided the most effective means to cope with the drought. One hopes that that experience will be replicated in all drought-affected areas this year.
An unavoidable consequence of any agrarian distress is the erosion of the resource base of farmers. Faced with income deficits, they have no choice but to liquidate some of their meagre assets to meet current needs. These are hard to recoup later on, as other pressing demands take priority in good years. The bitter reality of rural India is that income shortfalls are cumulative, but surpluses are not. The peasantry, which is barely recovering from 2009, is in for another reversal of fortune; one that will hamper its struggle for livelihood for some years.
The country is already reeling under food inflation hovering around the double-digit mark. As the bad news about rains spreads, that can only get worse. There may be some seasonal dips in prices of perishables like vegetables, but that effect is quickly worn off, as has happened this year. The overall inflation could well exceed the seven to eight per cent level, which policymakers are resigned to accept.
Thus the drought poses an economic threat on account of a combination of several factors: lower or negative contribution of agriculture affects the overall growth. It also reduces rural purchasing power, again acting as a brake on the economy. Increased rural distress requires greater resources for relief, which add to an already high level of budgetary deficit. To top it all, raging inflation smothers growth. Senior policymakers have already factored in these portents. Witness, for example, the alacrity with which Planning Commission deputy chairman Montek Singh Ahluwalia reduced the growth rate for the year to six per cent. The one advantage of the drought, it would appear, is offering a convenient cover-up for all other policy shortcomings.
Unlike in 2009, those at the helm of the Indian economy this year are even now reeling under a multiplicity of challenges, as pointed out in this column earlier (Win one for the Gipper, July 2, 2012). That makes the wanton stings and motions of vagaries of nature that much harder to bear.

The writer taught at IIM Ahmedabad and helped set up the Institute of Rural Management, Anand. He writes on economic and policy issues.