Belying official forecasts, the South-West monsoon has been exhibiting abnormal behaviour so far. After a late onset and a long lull due to Cyclone Biparjoy, it has revved up in the last few days of June to shower excess rains in North-West India, and ahead of schedule too. Cumulative data from India Meteorological Department (IMD) now show a 23 per cent deficit in the all-India rainfall between June 1 and 25.
Large swathes of Karnataka (52-58 per cent below normal), Kerala (64 per cent below normal), central Maharashtra (68-82 per cent below normal) and Bihar (78 per cent below normal) have been left parched, while Rajasthan, Saurashtra and Kutch have received an unexpected deluge. This has had an impact on kharif sowing, with the paddy acreage 5.6 per cent below last year’s levels, while maize and cotton face a 2 and 4.6 per cent shortfall, respectively. All this would not be a cause for worry if this year’s monsoon follows its predecessors. In the last few years, the monsoon has often charted a late arrival but delivered good rains in the critical sowing months of July and August, while withdrawing late. But this year, policymakers and farmers must have contingency plans in place to deal with the possibility of a sub-par monsoon, as an evolving El Nino is in play after a four-year gap.
A study by RBI researchers published in the latest bulletin offers useful pointers on how El Nino may impact agricultural output and inflation. It maps long-term data to conclude that it is not just El Nino alone, but the interaction of El Nino with the Indian Ocean Dipole (IOD — the difference between the temperatures of Western and Eastern Indian Ocean) that decides the fate of the Indian monsoon. Positive IOD conditions can offset an El Nino event, but an El Nino accompanied by negative or neutral IOD inevitably means deficient rains. With IOD conditions remaining neutral so far this year, there’s a live risk of a sub-par monsoon. For agricultural output growth, the paper finds, it is not just the quantum of rainfall that matters, but price incentives and investments in agriculture. While investments can only be shored up over time, the Centre has announced healthy MSP increases for this kharif, with a 6-7 per cent increase for paddy and pulses and 10 per cent for oilseeds.
The policy challenge now lies in ensuring that market prices hold up over the MSP. The paper notes that allied activities such as horticulture and dairying are less vulnerable to El Nino effects than foodgrain output, therefore policy support and incentives to these sectors can cushion farm incomes from a dodgy monsoon. The RBI can take comfort from the finding that only negative IOD conditions accompanying an El Nino have caused droughts severe enough to spark high food price inflation. History suggests that the IMD’s long-range forecasts in April and May tend to over-estimate monsoon performance in the El Nino years. Therefore, to avoid being caught unawares, the Centre and the RBI need to keep close track of the IMD’s nowcasts and weekly monsoon commentary, with particular attention to evolving IOD conditions.