Later this week, the monsoon, the country’s annual tryst with the summer rains, will make landfall in mainland India; it has already arrived in the Andaman and Nicobar islands, located off the east coast of India. Stunning satellite pictures hosted by the Indian Meteorological Department (IMD) on its website suggest that the monsoon is likely to hit the southern coastline as forecast on 30 May (a day earlier than normal). The big question is what after that.
Will it be the normal monsoon the IMD has forecast? Will it be distributed evenly or like last year be particularly severe on southern India? Will El Niño, the dreaded weather phenomenon associated with bad monsoons (though there is no perfect correlation), return as predicted in some quarters? Or will, as the IMD claims, El Niño arrive after the end of the monsoon season, in October?
The answer to these queries—or put simply, the fate of the coming monsoon—is critical to maintaining the ecosystem to foster an economic recovery. Yes, the pressure of retail inflation has abated very sharply, but the threat remains. A bad monsoon is the kind of trigger that could kick-start inflationary expectations; and if there are other counter-pulls, like say an unexpected spike in international crude oil prices, then the otherwise stable macro economy could unravel very fast.
And the recent track record of the monsoon is not very inspiring. In 2014 and 2015, forecasts of normal rains notwithstanding, the actual monsoon was below par—in fact, it created drought-like conditions and some parts of India like Maharashtra and Karnataka were severely afflicted. Naturally, water levels in the reservoirs located in these states/regions is a cause for worry and consequently, the coming monsoon will be key to providing a semblance of water security.
According to the Central Water Commission, as of 25 May, the water available in the 91 reservoirs in the country was 127% of the live storage in the corresponding period of last year and 109% of storage of the average of the past 10 years. But the national story does not play out at the regional level; for instance, in the South, at present it is 8% of the total live storage capacity of these reservoirs, compared to 11% in the corresponding period last year and 17% of storage of the average of the last 10 years.
A corollary of rural distress is that the government has to expand the scope and scale of the social safety nets it offers, especially the marquee Mahatma Gandhi Rural Employment Guarantee Scheme; already, it has touched record highs last year with the Union government seeking to soften the impact of rural distress triggered by the drought-like conditions in 2014 and 2015— also a rare moment, when a bad monsoon has recurred in back-to-back years. Push comes to shove, the government will pump in money, but given the fiscal constraints, it means diverting key resources from other priority projects.
In turn, this puts pressure on consumer demand. It is a fact that much of the growth in consumer demand in the last decade has come on the back of a buoyant rural demand. The end of the global commodity price boom after 2009, together with rural distress, led to a shrinking of rural demand. To be sure, a section of Indian agriculture, to an extent, has due to a combination of crop diversification and reliance on irrigation, delinked itself from the monsoon; instead, it remains vulnerable to vagaries of market prices and the overall economy.
Clearly then, there is a lot riding on this year’s monsoon. A clearer picture will emerge when the IMD releases a more detailed forecast early next month on the progress of the monsoon.
Till then, it is fingers crossed.
Anil Padmanabhan is executive editor of Mint and writes every week on the intersection of politics and economics.
His Twitter handle is @capitalcalculus.
Respond to this column at anil.p@livemint.com