What is El Nino?
The El Nino (Spanish – The Little One) is a weather phenomenon that occurs every two to seven years and lasts for almost a year. During this period, the east equatorial Pacific Ocean waters tend to become unusually warm and this affects wind patterns causing abnormal rainfall in many parts of the world. The years that the El Nino strikes witness excessive rainfall in some parts of the world and droughts in others. One of the fallouts of the El Nino is the weakening of the Southwest Monsoon that brings rainfall to India. Worst affected by El Nino’s impact is India’s agriculture and consequently, the economy as a whole suffers. The production of summer crops including cash crops such as rice, cotton, sugarcane, and oilseeds is adversely affected due to a poor monsoon. High inflation and low gross domestic product growth are usual consequences, given that agriculture contributes almost 14 percent to our country’s GDP.
Why is India Worried?
In the previous two instances of El Nino occurrence – 2004 and 2009 – India suffered severe drought conditions with the monsoons dipping 88 percent and 79 percent respectively (of 50 year average rainfall measure). According to reports from the Indian Meteorological Department (IMD), the country received 92.4 millimeters (about 3.6 inches) of rainfall in June – this is about 43 percent less than the average rainfall recorded between 1951 and 2000.The central and western regions of the country seem to be the worst affected with the monsoon having made next to no progress since mid-June. This could potentially mean that the country will receive about 7 percent less rainfall that the average due to the El Nino. To make things worse, predictions from the Australian weather bureau suggest that the El Nino may have just picked up and its onset could be earlier than previously predicted (September). Even a 5 percent deficient monsoon could cause India’s GDP a loss of about 1.75 percent (INR 180000 crore).
What Could Happen…
The agriculture sector is likely to be severely affected by the occurrence of the El Nino. In India, about 833 million people depend on agriculture for their livelihood. Now with predictions that almost 90 percent of India is to expect deficient rains, the sowing of summer crops such as rice, soybeans, oilseeds, corn, and cotton has been considerably delayed. India is now likely to produce 8.2 million tonnes of soya in case of a strong El Nino, 9.9 million tonnes in case of a moderate El Nino, or 10.2 million tonnes if the phenomenon goes weak. In the previous El Nino free year (2012-13) Indian farmers harvested about 14.67 million tonnes of soyabean. Similarly, the production of corn could go down from 25 million tonnes in 2012-13 to somewhere between 23.1 and 22.5 million tonnes on account of a weak to moderate El Nino. India’s corn export has already been losing out to countries such as Russia and Ukraine and this could come as a big blow to the corn exporters.
Data sourced from the Agriculture Ministry indicates that in 2012-13 about 3.6 million hectares of rice were planted across the country. This has sunk to about 2.2 million hectares as of end June. Oilseed farmers have also faced their share of woes with sowing dropping by about 47 percent to 479,000 hectares by end June; similarly the area under cotton farming has shown a 48 percent decline with only 2.9 million hectares been under plantation this year.
What Are We Doing About It?
Given the weather forecasts and the threat of a sub-normal monsoon, the government of India needs to start planning counter measures right away. Crop failure and agricultural setbacks could add to the food inflation woes – already one of the biggest challenges on the Finance Minister’s plate. The government of India has already promised to offload about 5 million tonnes of rice from its reserve stockpiles. This is almost 25 percent of the government rice reserves and transferring this quantity to the markets at subsidized prices should bring some relief from the skyrocketing food prices. After having set up a minimum export price for onions, the government is now considering initiating a similar price restriction on the export of potatoes. Furthermore, the central government has promised to import pulses to provide relief in case of crop failure due to drought-like conditions.
It remains to be seen what impact the budget has on relief activities both by way of subsidies and support. Food accounts for almost 50 percent of the country’s consumer-price inflation kitty. In May, the skyrocketing food inflation reduced India’s consumer inflation gains to a mere 8.28 percent – a three month low. What we now await is news about the measures that the NaMo administration shall take to combat what is an already threatening inflation scenario.