Finally, there’s some good news for a country seared by water shortage and drought-like conditions — the IMD has forecast an above-normal monsoon (6 per cent more than the ‘long period average’ of 89 cm) after two straight years of deficient rains. That the factory output index broke into positive territory in February (up 2 per cent), after posting three consecutive months of decline, has also added to the sense of relief, with the markets gaining ground on Wednesday. However, a closer look at the IIP figures raises questions about whether this recovery is for real. While basic and intermediate goods used in production such as mining and electricity output have shown some improvement in February in relation to the three preceding months, the same cannot be said for capital goods and consumer non-durables. Both have posted four straight months of decline, which collectively suggest that the slump in demand — particularly rural demand — is restraining investment. As the RBI’s latest monetary policy report observes: “While private consumption has been the mainstay in holding up aggregate demand, it has largely been an urban phenomenon; coincident indicators of rural consumption have generally remained weak or in negative territory.” That the urban consumer alone is driving the economy is perhaps borne out by the high rates of growth in the consumer durables segment — and the buoyancy is likely to stay with the implementation of the Seventh Pay Commission award. A good monsoon could bridge the chasm between ‘India’ and ‘Bharat’, lifting not just agriculture output prospects but also reviving investment appetite across sectors. The recent rate cut along with efforts to ensure its transmission can make a difference here. A sustainable growth rate of 7.5-8 per cent (against an estimated 7.6 per cent in 2015-16) can be achieved on the back of an agriculture turnaround, offsetting the negative tidings on the export front.
However, an above-normal monsoon need not translate into a spurt in farm output, as much would depend on its spatial and temporal distribution. Weather scientists have pointed to a fall in the number of wet days in the monsoon months in recent years. Hence, a ‘normal’ monsoon also suggests intense rain, devastating floods, crop damage and lower groundwater recharge. If reports of a late onset this year come true, it could damage the prospects of early sown kharif. Likewise, a late surge towards autumn, which has become a pattern, could damage standing crop. Research and extension departments should be prepared for a range of varieties to deal with fickle, climate change-induced weather.
It must be remembered that there are still three months to go before the monsoon arrives. Large swathes of India are in the grip of water scarcity — for which groundwater drawals and the decay of water bodies are as much to blame as the ongoing dry spell. More than the monsoon, management of water will play a key role in economic performance in the years to come.