The MET department has forecasted presence of El Nino for the second year in a row, only this time it is expected to be much stronger. Simultaneously the agriculture ministry has also submitted a report on unseasonal rains that impacted the Rabi crops last fiscal. Will the agri community face the curse of weather gods once again?Abhijit Sen, professor of economics at JNU, says a depressed rural income is of far greater concern now, what with talks of yet another year of insufficient monsoon doing the rounds. In an interview to CNBC-TV18, he said the impact on rabi crop may not hurt as much as that on more widely grown kharif. Hence, farm income is actually a bigger worry now, not inflation.
To compensate for the income going down (15 percent of the nation's income come from agriculture), the government needs to implement the existing NREGA scheme efficiently. NREGA is a rural job scheme introduced by the previous UPA regime. He also believes the rural schemes could be better administered since states have more money in their hands.
Going by MET's prediction that north-west India is the weakest spot to experience the bad spell, Sen said "if that is the case then the output impact will be lower. Impact will be more if monsoon showed weakness in the peninsular region."
Below is the transcript of Abhijit Sen's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18. Latha: First on food inflation in particular. We appear to have put the lid on it in the last 12 months or so but another subpar monsoon might increase both food inflation and inflation expectations you think? A: It could but there is one other big thing which is playing out, which is world commodity prices subdued projected to remain pretty subdued and we often tend to overestimate the impact of output in the domestic output and underestimate the impact of world prices. There are these two things which are happening. I am not as concerned on the inflation front as on other matters except to point out that there are perishable items where shortages especially sustained shortages will have an impact and not necessarily immediately but running into second half of this fiscal.
Sonia: The ministry of agriculture's report on impact of the unseasonal rains on the rabi crop mentions that 9.5 million hectares was damaged because of the unseasonal rains and the wheat output will go down by 5 percent. If we do get a second year of sub-par monsoon then what could the impact on the Rabi crop be you think? A: The main effect of this forecast relates to the kharif crop. Sonia: Could you give us the impact on the kharif crop that you expect to see? A: Roughly the forecast as it stands would mean that the output would be about the same level as it is this year which is somewhat lower than last year but is not disastrous and certainly within the capability of our coping especially in rice and wheat with the stocks that we have. As far as rabi is concerned, the problem this year has been unseasonal rains, not the lack of rains as the current forecast that you are looking at. Therefore, one needs to get the parameters right before making any forecast. As of now things are early. We should say that there is a probability of agricultural year not very different from the current year, which means two below par years one after another does have its implications. But I do not think one should throw up his hand and say it’s disastrous.
Latha: The rural distress is another kettle of fish. A: The rural distress is much the more important problem because what you have – the two things that I just talked about, which his low monsoon and low prices, both of them tend to reduce farm income. Latha: You think that this is going to be a huge spell of bad news for the rural economy. You do not see it recovering anytime soon. I mean another one good rabi would not be enough, the FY16 rabi? A: It might but the point is that rabi has an impact which is more limited regionally than the kharif impact. I think farm income is a matter that we should be worrying about rather than inflation.
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