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Normal Monsoon This Year Holds Potential for Agriculture Sector: Dr Shivendra Bajaj, FSII & AAI

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Monsoon

Rainfed farms in India occupy about 51 percent of the country's net sown area, therefore, monsoon rains are  of utmost importance and benefit. Rainfall has a direct impact on agriculture since water is an essential input for farm production. And thus, countries with low irrigation coverage become more vulnerable to monsoon failures. Availability of water at a particular time can lower or increase the quantity and quality of food crops. In India, monsoon through the demand and supply interlinkages of the farm sector with other sectors of the economy influences the standard of living and overall demand in the economy. 

This year, monsoon showers across the country are predicted to be ‘normal’, which raises hope for better farm productivity and its cascading positive impact on rural growth and the overall economy. Southwest monsoon accounts for about 70 percent of the total rainfall the country receives annually and has a significant impact on farm and industrial output, employment generation, and even food inflation. Thus, the forecast of a ‘normal’ monsoon this year has brought relief to farmers, industries, and governments alike.  

There is confidence among policymakers and industry doyens about ‘normal monsoon’ will lead to higher crop output, which in turn means higher farm income and thus boosting rural households’ capacity to purchase consumer goods, vehicles, agricultural equipment. Last year, the monsoon had ended at ‘above normal’. But this year, the performance of monsoon matters more since the second wave of Covid-19 has made inroads in the rural hinterlands this year, which was not the case last year as rural India had remained mostly unaffected by the pandemic. Luckily, the second wave of the Covid-19 has started to recede as crucial sowing work begins across the country.

According to the Reserve Bank of India (RBI), the monsoon this year is going to sustain rural demand and overall output while alleviating food inflation. Food production will occur as expected owing to the normal monsoon. Besides, the filled reservoirs will translate into required confidence that adequate water will be available for irrigation purposes, especially during the Rabi season. All this will bring up positive sentiments in the market and bring down prices as the supply meets demand smoothly.

The monsoon has a direct impact on food prices. This year, experts believe that crop output will be assured and sustained. It will certainly keep a tab on the rising prices. There are predictions that a probable normal monsoon will lead the farm sector to register a growth of at least 3 percent this year, which will reduce potential risk on the inflation front. Moreover, bumper harvest and more money in the hands of rural households will drive consumption. This also affects non-food inflation.

Monsoon impacts employment livelihoods and employment generations. While agriculture’s contribution to India's GDP has been just 20 percent, it is the primary source of livelihood, which is about 58 percent of India’s population. Centre for Monitoring Indian Economy (CMIE) report showed how employment opportunities in rural India have grown up following improved monsoon rains in 2019.

Agriculture was a sole bright spot in 2020 when the Indian economy was facing headwinds of coronavirus. The RBI said it has a salutary effect on consumption growth as sales of vehicles, fast-moving consumer goods (FMCG), as well as fertiliser production, had increased. On other hand, major drivers of the economy were badly hit after a few months into the pandemic and a good monsoon had come as a savior. Amid pandemic blues, agriculture-led growth certainly holds potential to bring the overall economy back on track.

About the Author

Dr Shivendra Bajaj holds office of the Federation of Seed Industry of India (FSII) and Alliance for Agri Innovation (AAI) as the Executive Director.

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