By Sushma Ramachandran, IANS,
The latest data on industrial output, which shows a 7.8 percent growth in June, brings with it a silver lining to the spectre of drought, which looms large over the country because of the scanty June-September monsoon, so critical to the country’s farm output.
Little wonder the country’s overall growth projections have now been pushed up once again to around 6.2-6.5 percent. But that does not take away the seriousness of the situation since agriculture remains a major driver of the country’s economy although accounting for just 17 percent of the country’s gross domestic product (GDP).
As many as 600 million people in India remain dependent on the farm sector for livelihood. The prevalence of drought in 25 percent of the country’s 626 districts thus remains a matter of serious concern. The government, therefore, needs to act, and act fast.
The most critical casualty of droughts is the farmer – and the government cannot ignore the suicides committed by them in recent years when they were under distress. Not only have their crops failed, many have found that their cattle have died. It is imperative, therefore, for the government to quickly work out a rescue package for farmers.
Several steps are needed:
– Farmers need to be provided with alternative employment opportunities through the job guarantee scheme.
– Emergency supplies of food need to be rushed to drought-hit areas where many are going hungry.
– Fodder needs to be made available in these areas to prevent further cattle deaths.
– And the government may even have to think of yet another loan waiver scheme for farmers in drought-hit regions.
The other issue of food price inflation, which Prime Minister Manmohan Singh has been warning about in recent pronouncements, also needs to be tackled with the same urgency. The plus point is food grain stocks in this country remain at relatively comfortable levels.
But there may still be a need to import grain and a decision on this needs to be taken quickly as world prices have already begun rising in response to reports that India may enter the market. India is a big buyer. Its entry into the market normally leads to some hardening in the expectation of large purchases.
Other commodities may also have to be imported given the failure of the sugar crop and the poor output of pulses – an important source of protein for the poor that is costing over Rs.100 per kg for some varieties.
Sugar remains a cyclical problem, now aggravated by drought, but output of pulses continues to stagnate, despite innumerable schemes, and larger imports are needed to meet domestic demand.
The drought also highlights the vulnerability of Indian agriculture to climate change. Despite pious intentions of several governments, irrigated areas have not expanded sufficiently, but for Punjab, Haryana and western Uttar Pradesh. The harsh consequence has been a crisis whenever the monsoon plays truant.
The current spell of drought has also cast a doubt over India’s ability to rebound fast from the recession. Even Finance Minister Pranab Mukherjee has pared his growth forecast to six percent from 6.5 percent earlier.
The latest industrial output data, however, has been much more encouraging, though rural demand may not rise as much as anticipated this year. There is hope yet, as “kharif” is the summer sowing season in India and the “rabi” or winter crop is still to come.
The summer crops are mainly paddy, millet, pulses, maize, sugarcane and oilseeds, while the main rabi crops are wheat, barley and gram. Thus, even as there could be a fall in the output of rice, sugar, pulses and oilseeds, the production of wheat and barley may still be more than sufficient to meet the country’s needs.
But that does not wish away the fact that the immediate situation remains critical due to the drought, hampering the prospect of a stimulus in demand over the next few months on account of the festival season between September and November.
Normally, the numerous festivals in the run up to Diwali provide an occasion of feasting and buying, much on the lines of the Christmas season in western countries. But such a buying spree is unlikely in rural areas given the dent on purchasing power due to the drought.
Both the prime minister and the finance minister have assured timely steps and said the country has the capability and the capacity to tackle any eventuality as the country did on the previous occasion in 1987. One can only hope these skills have improved so as to cause minimum pain to the common person.
(14.8.2009-Sushma Ramachandran is an economic and corporate analyst. She can be reached at [email protected])