India’s agricultural outlook for FY24 will largely depend on rainfall from the retreating monsoon this month and next. Rainfall has been very low so far (11% below normal since June 1), but September is poised to be an even better month, with the IMD forecasting normal rainfall (5% of the month’s long-term average 91-109%). This could salvage the declining yields of crops in peninsular and eastern India, which besides cotton and jute also include rice, tur and urad. Reservoir levels may be replenished with rabies crops, especially in eastern and peninsular India where water levels are low (23 out of 150 reservoirs across India are below 50% of normal levels). The prospect of lower food production at a time when food inflation is already in the double digits is adding to inflationary pressures and presenting policy challenges.
Since June 1, Kerala (-46%), Jharkhand (-37%), Bihar (-27%), Chhattisgarh (-20%), Khanna Taco (-19%), Odisha (-14%), Maharashtra (-13%), Madhya Pradesh (-19%), Uttar Pradesh (-19%), Asa M State (-16%) and West Bengal (-14%) – in short, straddling Peninsular India and Eastern India. The situation looks even worse when only August rainfall is considered. Huge deficits (60-100%) have been reported across the entire corridor from Kerala, Karnataka, Maharashtra, West Madhya Pradesh, Gujarat, Rajasthan and Punjab. The rest of the country fared slightly better.
The IMD’s September forecast predicts insufficient rainfall along the north-south corridor, but adequate rainfall in eastern areas and parts of the Gangetic Plain. Vulnerable crops in the corridor include jowa, bagjira, tule, soybeans, groundnuts, sugar cane, cotton and corn. However, final yield losses are likely to be lessened due to improved rainfall in the eastern regions, which increased the area planted to rice by more than 1.4 million hectares. Increased rainfall in the northern interior of Karnataka, Telangana and Andhra Pradesh is likely to boost pulse and millet production, although tur planted area has fallen sharply from last year. Drought-resistant rice varieties can minimize yield losses.
Food-fueled inflation worries the government. Analysts said rice prices rose 11 percent year-on-year in August, while prices of jowar, tur, urad and moong rose 50 percent, 37 percent, 21 percent and 21 percent, respectively. While agricultural production and buffer stocks (especially rice) have been sizable in recent years, this casts doubt on whether structural factors are at play. The government banned rice and wheat exports, imposed strict export prices on onions and lowered import duties on cooking oil. Imports of pulses are about to increase. The key, however, is to lower prices by increasing supply by just the right amount, rather than going to the other extreme and hurting farmers. For this, better inventory and production data are needed.