Weak monsoons cloud economic prospects this fiscal

Monsoon in India: Does a weak monsoon pose a further threat to economic prospects this fiscal? Policymakers and experts believe that India’s farm sector has become more resilient to poor monsoons although there remain concerns that below average rains could fuel some inflation further.
 
Amid this volatile external environment, the uncertainty over the monsoons has created more worries. With a super El Niño seen to be developing this year, the India Meteorological Department (IMD) has forecast the monsoon for 2026 at 92% of the long period average.
 
While it is still early days to ascertain the impact of the rains on the economy, the government remains hopeful considering the higher reservoir levels and expectation that much of the sowing will be completed before El Niño conditions develop later in the summer. Sources point out that farm sector has been growing at 3-4% in the last few years and even in the rural economy, the direct dependence on agriculture has reduced.

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Agricultural Economist PK Joshi, who is Vice President of the National Academy of Agricultural Sciences, agreed with this assessment and says that in the last 10-12 years, several studies have shown that Indian agriculture has become resilient to climate change.
 
“Even in the last three to four years, despite droughts in several regions, our agriculture has remained resilient and poor rains have not impacted productivity. Use of irrigation has ensured that poor rains do not impact production. As a result, the forecast of a below average monsoon should not have a significant impact on agriculture production this fiscal,” he said, adding that a NITI Aayog study had shown that earlier, the normal growth rate in agriculture was 3%, but the new normal is 4%.

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“The government is working on ensuring adequate stock of fertilisers. The promotion of natural farming and allocation for it in the last two Budgets will also help tide over any fertiliser shortage. In the meanwhile, there should be more focus on improving fertiliser efficiency at the farm unit level,” said Joshi.
 
Dipti Deshpande, Principal Economist at Crisil however said the adverse impact of heatwaves and a below-normal southwest monsoon are upside risks to food inflation.
 
CPI inflation in April rose to 3.48% and most economists expect it to rise to 5% or more this fiscal as the fuel price hikes following the West Asia war have an impact.