Damp Squib

INFLATION of 1 to 2 per cent. Bountiful, cheap food and vegetables. This year has been kind to household budgets. Not for long, though. The rain gods have put a hasty end to the good times. In the arid regions of western India and some parts of the north and south, scant and late rains have wreaked havoc on a major chunk of the kharif crop and seasonal vegetables. And thrown a few dark clouds over the rabi prospects.

So much so that experts are talking of at least 5 per cent inflation by March, rising prices of edible oil and vegetables from November and a much lower agricultural growth of around 1 to 2 per cent. The drop will be sharper seen against last year's 7 per cent. Unlike last year, the farm economy will pull down GDP growth, already under a cloud due to excess spending and high borrowing.

The government has scaled down production figures for oilseeds, coarse cereals, commercial crops like jute and cotton, and pulses. The worst hit is groundnut—the largest oilseeds crop with a 34 per cent share in the total—where the extent of damage is 60 to 70 per cent. Says an official in the agriculture ministry: "Groundnut crop is likely to be severely affected with production falling to 4.5 million tonnes (MT) as against 7.1 MT last year. This will contribute significantly to a lower kharif oilseeds crop of 12 MT, more than a quarter less than the record production of 16.3 MT last year." Even in soyabean, which saw a record output of about 6 MT last year, the harvest may be 1 MT less this time thanks to delayed rains in Madhya Pradesh, the major producing area.

In Saurashtra, home to groundnut cultivation, and also in Vidarbha, growers are a picture of misery. "Saab, sab khatam ho gaya (everything is finished)," is the common refrain. Says agriculture economic expert Ashok Gulati, professor, Institute of Economic Growth: "Gujarat is 50 per cent down and groundnut farmers are in a bad shape. But traders are clever. Anticipating this, they'd imported 3.5 MT this year (the oils-eeds season is October-September). But demand will peak in November, so it's safe to say that both import cost and domestic prices will start rising from that month."

The edible oil picture gets bleaker when one reviews the prospects for rabi. The oil-seeds crop target for 1999-2000 was fixed at 28 MT, with kharif accounting for 16.5 MT and rabi the rest. Even though the late precipitation is expected to be good for rabi cultivation, there is a flip side. The major rabi crop and second largest oilseed, mustard, where the target is 7 MT, has been going through bad times of late. First, adulteration. Then a bumper crop sent prices reeling. The acreage under mustard could really shrink, with many farmers still holding on to last year's crop for better prices. The same reason also affected the cultivation of soyabean, which many expect will soon dethrone mustard.

Oilseeds isn't alone. Coarse cereals (jowar, bajra, maize, ragi and small millets), the main food of the poor and rain-fed crops, have been affected all over the western parts due to moisture stress. Output will dip by at least 2.5 MT to around 22 MT, while rabi may contribute 7.5 MT more. Even in pulses, output may dip marginally to 5.5 MT, though the major share will come from rabi, where the target is 9.4 MT. The good sign is a much improved sugarcane crop.

How could a southwest monsoon which has been described as "normal" tamper so much with agriculture production? Says Anil Sharma, principal economist with NCAER: "The normal band is +10 to -10 wide. Our estimates up to September 8 (monsoon is June 1-September 30) put the monsoon at 6 percentage points below the normal mean, but it is still very much in the normal band." In terms of the 35 meteorological zones India is divided into, more than a quarter received deficient/scant/nil rainfall up to September 1. There were some rains afterwards, but that's unlikely to change the picture for the better. Says Bhupat M. Desai, professor, IIM Ahmedabad: "September rains may help in some areas, while in some others they may damage crops." In other words, since our statistics departments aren't reputed to err on the side of caution, even the advance estimates may look optimistic during the second crop assessment in January.

Does that mean a bleak food situation in 1999-2000? Far from that. One reason is that the agriculture year is June-July, which means the real impact of production reverses may be felt only in the next fiscal. But a more important reason from the consumer's point of view is that availability of basic foodgrains, which are just rice, mainly a kharif crop, and wheat, a rabi crop, will not go down at all. There are two reasons for that. For one, thanks to last year's bountiful production, foodgrain stocks are bulging at 31 MT. Especially wheat, procurement of which touched a record 12.65 MT this year, against 9.3 MT in the previous, owing to a very attractive minimum support price (MSP). In fact, rising MSPs have been responsible for nominal food prices touching international levels of late, while ensuring farmers get attractive returns. The domestic price of wheat, says Sharma, is now the same as its world price.

THE more important reason why food outlook is good is that although rains were irregular in all of the Indo-Gangetic belt, sowing of rice was not affected. First estimates put kharif rice output at 75 MT, 3 MT more than last year's and higher than the target of 74.5 MT. So, the government crows in pride, "the overall kharif grains output is likely to be 102.7 MT, about the same level achieved last year. This shows that the production pattern has reflected sound resilience in spite of unfavo-urable monsoons."

A resilience contributed sorely by politico-economic factors, no doubt. Why are farmers in certain regions like Punjab and Haryana obsessed with rice, a water-draining crop? Because of near-free and plentiful power to run irrigation pumpsets, abundant state incentives and galloping procurement prices with captive buyer like the Food Corporation of India. Wheat MSP was Rs 550 a quintal for '99, while rice MSP for the current season has been declared at Rs 490 for common and Rs 520 for fine. As a result, in Punjab, cotton fields are yielding to rice. Says Sharma: "During the rice season, the entire state looks like a large, shallow pond." All over India, the same thing is happening to rainfed crops like coarse cereals or pulses—the cultivated area shrinks steadily, while the government remains glued to its strategy of food security. Incurring food subsidies, and artificially skewing consumer markets, prices and the lot of farmers cultivating crops that are still dependent on the right kind of weather conditions.

Like growers of cotton or oilseeds. Laments Gulati: "Even as the western part is reeling under drought, the eastern part is flooded. That is why we need in this country a good, viable system of crop insurance. Just because Himachal farmers have no lobby, they suffered silently even as 90 per cent of the apple crop was wiped out." While the government is launching a new crop insurance scheme from rabi 1999-2000, it will cover only sugarcane, potato and cotton in the first year.

Counters a senior official in the agriculture ministry: "Our farmers aren't that poor any more, nor do they live cloistered lives. Consumerism has overtaken them, they want to produce crops that need better irrigation or finer grains that fetch better returns. That's inevitable." As Sharma agrees, real food prices have come down over the decades. And with agriculture now accounting for only a quarter of the GDP, risk will soon be something that the sector will associate only with the rains.