Monsoon Forecasts, Droughts And Hysteria

If this turns out to be be correct, it could be the most significant piece of “crystal gazing” for the Indian economy, for Indian farmers and for the seemingly “beleaguered” government of Narendra Modi. According to the official met department , there is a more than 94 per cent probability of India being blessed with an above average monsoon this year. This comes in the backdrop of two successive years of poor monsoons that have led to declining farm output, severe drought like conditions across about 10 states, misery for farmers and the failure of rural incomes and demand to pick up.

The met department forecast of a decent monsoon ahead comes just a day after the private body Skymet issued a forecast that India will have an excellent monsoon this year. In 2015 too, Skymet had forecast a normal monsoon while the more conservative met department had forecast a poor monsoon. Almost everyone is hoping that the forecasts this year turn out to be correct.

Two failed monsoons and the continuing crisis in Indian agriculture have to a large extent taken the sheen off many initiatives being taken by the Modi regime. So severe has been the impact of failed monsoons that even mainstream Indian media, that usually ignores agrarian issues, has been devoting a lot of time to the almost calamitous drought like situation in states like Maharashtra, Telengana and Karnataka. Virtually all news TV channels have been breathlessly covering the IPL versus Farmer that is being played out in the Mumbai High Court where a petition has sought the shifting of 15 odd IPL matches scheduled to be held in Mumbai, Pune and Nagpur to other states. The plight of residents of Latur town waiting for a train full of water has captured the imagination of even cynical urban media consumers.

A good monsoon would lead to many positive outcomes. First, it would result in increased agricultural output and improved farm incomes. This in turn would lead to a significant improvement in rural demand. The persistence of weak rural demand has actually prevented a full fledged revival of growth in the Indian economy. Companies across verticals like auto, consumer products, textiles and mile phones have reported how weak rural demand has led to sluggish sales. In many industries, rural sales account for more than 50 per cent of total sales of big and small companies. If rural demand actually revives post harvest in 2016, it will join Seventh Pay Commission Hikes and OROP as significant multipliers to aggregate consumer demand.

But the media outcry over the drought in Maharashtra and the “starving farmer versus the greedy IPL” narrative being peddled is a classic example of a collective failure to seriously address long term issues. For decades, analysts in Maharashtra have been pointing out how the sugar lobby in Maharashtra has been cornering a lions share of limited water resources. There have been umpteen warnings of a looming crisis. But neither the government, nor the judiciary or even the suddenly active media has paid much attention till recently. Even now, the focus is on “greedy Villians” of IPL rather than how the sugar lobby is the main culprit. Then again, there have been persistent reports since more than a decade about how thousands of crores (more than Rs 70,000 crores) “invested” in irrigation facilities are actually a sham.

There seems to be no serious effort to punish the people responsible for this monumental scam. What's happening in Maharashtra can be seen across India. Governments routinely announce “free” water and electricity to farmers, resulting in widespread misuse and wastage by those who can afford pumps and generators. This will inevitably lead to unprecedented water shortages and water riots in the next few years. The only solution lies in economics: make consumers realize the value of water.

A good monsoon this would be great news. But that should not mean ignoring the real long term issues.