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Delayed rains not to impact recovery: Economists

Mamata Singh in New Delhi

The delay in the arrival of the monsoon will not have any significant impact on growth, feel economists.

While it is still too early to paint a definite picture, they say, the delay may affect demand and the recovery process. The impact will, however, not be strong enough to derail recovery, the economists maintain.

"At most, it may lead to a modest negative impact," says Saumitra Chaudhuri, economic adviser at the Investment Information and Credit Rating Agency. What could have led the government to start taking steps to counter the likely impact of the delayed monsoon was the expected rise in vegetable prices, the Icra adviser said.

Pointing out that vegetable prices are very sensitive to monsoon failure, economists, though, maintain that their production and consumption are localised and assessing their exact impact on growth is a difficult proposition.

After the Bharatiya Janata Party government fell in Delhi in 1999 as a result of a sharp rise in onion prices, the Centre could be trying to be cautious in view of the upcoming elections in ten states, they say.

The extent of the impact on growth will depend on the severity of the monsoon failure.

In some cases, the kharif crop has suffered because of the delay in the arrival of the monsoon, but late showers could mean a bumper rabi harvest, economists add. Since both account for about half of the foodgrain production in the country, the overall impact will be muted, they maintain.

Delayed monsoon in Punjab, Haryana and western Uttar Pradesh will not have much of an impact on crops because these areas are well irrigated, economists say.

Areas that are likely to suffer from severe crop failure in case of further delay in monsoon are some parts of western, central and eastern Uttar Pradesh, Madhya Pradesh and Rajasthan.

"Demand for manufactured products is not very high in these areas," economists point out. Therefore, the likely fall in agricultural incomes will not affect the demand for manufactured products significantly, they add.

Inflation, which may rise on account of surge in vegetable prices, will come down within a couple of weeks after the rains. The production cycle for fresh vegetables is fairly short and prices of items like tomatoes will fall once it starts raining.

After nine years of good monsoon, the rains have been erratic for four years. If the government leverages the large stock of foodgrains available with it, the human cost of a delayed monsoon will not be very high, economists state.

The government should, however, start focusing on irrigation to reduce farmers' dependence on rainfall. In Rajasthan, Madhya Pradesh and central Uttar Pradesh irrigation requirements immediately need to be taken care of, they feel.

There is a need to revamp the public works departments in states. The department, which is responsible for providing infrastructure for irrigation and watershed development, has not been efficient in fulfilling its responsibilities, economists add.

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