The arrival of the south-west monsoons in Kerala ahead of its time has raised hopes in the country that it will boost agricultural output, rein in galloping inflation and bring relief from skyrocketing food prices.
Monsoons, which have an enormous impact on the economy, can bring down food prices, which is a major driver of inflation right now. Moreover, for the fourth time in a row in the last three years, the India Meteorological Department (IMD) has also predicted a normal monsoon. In fact, normal monsoons have helped agriculture record steady growth, while the rest of the economy suffered due to the pandemic.
The agriculture, forestry, and fishing sectors grew 3.3 per cent each in FY21 and FY22, against a 6.6 per cent contraction in the overall economy in FY21 and an 8.9 per cent rise in FY22.
Rain will also give relief from the intense summer heat that severely hit north-India and destroyed the wheat crop and triggered a power crisis due to rising demand. Wheat is very sensitive to heat, especially during the final stage when its kernels mature and ripen. Indian farmers time their planting so that this stage coincides with India’s usually cooler spring.
India’s challenge with retail inflation
India’s retail inflation hit an eight-year high of 7.79 per cent in April, driven by high fuel and food prices against the backdrop of the never-ending Ukraine war. Food items primarily drove the rise in retail inflation in March. The consumer food price index rose to 7.68 per cent from 5.85 per cent the month before.
Also read: Southwest monsoon arrives in Kerala three days ahead of schedule
How monsoons help
The monsoon makes up over 70 per cent of the country’s annual rainfall and irrigates more than half of India’s cropland. The arrival of the monsoon signals the start of the cultivation of kharif crops, which are heavily dependent on rain. At the end of the day, the amount of crop cultivated is determined by the extent of the rainfall.
Now, with the onset of an early monsoon, farmers can go ahead and start planting major crops such as rice, soya bean, cotton, and pulses. With more improved sowing, the crop yield is expected to be high and this, in turn, could soften the impact of inflation and improve rural incomes. This in turn will boost rural demand for consumer goods, gold, cars, motorcycles, tractors, and farm equipment, as well as inputs such as pesticides, fertilisers and seeds.
A good kharif crop, easing of vegetable prices and a fall in edible oil will lower prices.
What could play spoilsport
What can play spoilsport, however, is the general shortage of fertilisers in the country. An existing shortage has been further aggravated by the war in Ukraine. Russia is the world’s largest exporter of fertilisers and much of India’s requirement is met by imports.
Also read: Monsoons in India normal this year; 99% rainfall expected
The supplies have been affected due to the war. Hence, prices have trebled and this may push up the prices of crops.
According to experts, the prospects for the agricultural sector, however, remain bright in FY23 with the prediction of a normal monsoon by IMD. However, prices of key inputs like fertilisers, diesel have been on the rise recently which could play a spoilsport, said a research analyst in an economic daily. And a good monsoon may not be able to lower the prices of the items currently driving food inflation in India such as edible oils.
Uncertainty surrounding the Russia-Ukraine conflict would continue to cause inflationary pressure. Despite a normal monsoon, inflation is expected to stay in the 6 per cent-plus band, if not higher.