Too early to paint gloomy picture on agri: Shubhada Rao

Here is a verbatim transcript of the exclusive interview with Shubhada Rao on CNBC-TV18. Also watch the accompanying video.

Q: Are you worried already-we have seen, at the highest levels of government, there seems to be a bit of a worry but as an economist how are you seeing this?

A: Surely, at the outset, the sentiment is going to be negative, looking at the forecast being revised lower from 96% to 93%. But, I would like to add quickly that it is too soon to paint a very gloomy picture on the entire agriculture scenario simply because we have seen earlier, maybe in FY2002, where the LPA was 92% and we did have agriculture growth of about 6.5% or so thereabouts. Thus, it is very important not just to look at the LPA-the percentage of how much it reaches normalcy-but also the distribution and the geographical span of the monsoon spread.

Yes clearly, June has been almost, pun intended, a wash out month. But July and August are yet to come in. And if monsoon does come in at this point in time we may not have such a gloomy picture on agriculture scenario. But the Delhi pronouncements have been that EI-Nino factor is going to perhaps gain greater weight. If that happens then I think agriculture will be dampener on the overall growth prospects.

Q: You've heard Montek Singh Ahluwalia as well as our correspondent giving a sense of what the government is talking about. He is talking of a two-week delay, shouldn't be a problem. How do you read these numbers that you've got?

A: I totally concur with Ahluwalia because there has been a year where the LPA has been about 81% in FY03 and the progress of monsoon was rather lackadaisical-it was just 41%, which was in the normal to excess that the MET divisions were receiving. In that year, we saw agriculture growth contracting by almost 7%.

So, yes, if it is combined as I said earlier, if the LPA is well below normal-below 90, then it is called deficient and that was particularly ascribed as a drought year.

However, I would think, we still have two good months and if we do receive rains in the next one week or so and if we do see some evidence of it progressing up the north and northwest region, then we may escape perhaps the worst scenario.

Q: What is the worst-case scenario according to you?

A: The worst-case scenario is very clearly if we don't receive rains at all till mid-July, and that is almost a month and a half of monsoon season, without any rains. Then that affects the agriculture operations-your crops. As it is the food inflation as it was being alluded to earlier, has been inching up both on the sugar side as well as on the primary articles and it would add a bit of pressure on food inflation.

That is not exactly what the government would like, because it once again then clouds the monetary policy issues. You have a consumer price index, which is moving once again over 9% and the wholesale price index at a negative. But, I am not yet ready to call it a complete gloom and doom scenario. But yes it is important because agriculture is important, monsoon even more so, because that has a round two impact on consumption as well as its impact on industrial production. So, all told, I think July will be a critical month to watch out for all analysts to revise our GDP forecasts based on agriculture performance.