Column : India is no longer a monsoon economy
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Asked to write on the monsoon failure in July, I have a sense of déjà vu. In a CII report on the monsoon that I chaired and in a recent piece in the Planning Commission's house journal, I argued that an agricultural drought is different from a meteorological drought and so don't get hyper if the long period average is tweaked a bit. Monsoon failure has important welfare implications for a majority of the rural population and then there is the drinking water problem, but it does not have that much of macro consequences. India is no longer a monsoon economy. Until the mid-1970s, growth was negative in half the year and the economy grew between 3-6% in the other half, giving us the average Hindu growth rate. But since then, we have had only 2 years with a growth of less than 3%. It has been argued by Arvind Panagariya that volatility is higher now. Even that is not the complete picture. If you compare the 1960s with the post mid-1970s period, volatility is less now. So, for macro outcomes, what Dr Manmohan Singh is configuring as macro policy will be more important than the MET data. Having said that, I am totally foxed with cavalier comments from Delhi on June's rainfall failure, from experts I respect.
One senior expert told us that if average rainfall is restored we will be alright: agricultural output grew marginally in 2009-10 with a 78% average. But there was a massive seed replacement programme that year after the early rain failure. Average rainfall does not determine output; its spread through regions and time does. To dismiss the June failure is absurd. In 2009-10 and this year, rainfall failure in the Northwest is not a big issue because Punjab, Haryana and Western UP are almost fully irrigated. Also the East has excess rain. But the scanty rain in MP, Rajasthan, Gujarat and Maharashtra is bad news. As is the deficient rain in the Deccan plateau.