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Let’s start first with the good news. According to the Indian Meteorological Department (IMD), monsoon rainfall has picked up in India, and General lack of precipitation in June (1 to 29) It fell to 5 percent compared to the long-term average (LPA).
IMD has also predicted that the rainfall in July will be normal and thus the total rainfall will be for the monsoon season (June to September). Important fall crops are likely to be sown, especially rice, maize, millet, pulses, oilseeds, and cotton. This will provide much-needed relief to farmers and monitors of agriculture and food prices. However, the precipitation prevalence is uneven so far. Large parts of Maharashtra, Karnataka, Kerala, Telangana, coastal Andhra Pradesh, Chhattisgarh, Odisha, Jharkhand, Bihar and even West Bengal are experiencing more than 20 per cent shortfalls in rain.
This is somewhat worrying. Moreover, the July 4 World Meteorological Organization (WMO) report declared that 2023 will be an El Niño year with a 90 percent chance. July 3 and 4 are reported to be the hottest days on earth. The rapid warming of the Pacific Ocean during July-September can play a spoiler with the Indian monsoon. One only hopes that the positive Indian Ocean dipole (IOD) can neutralize the negative influence of the El Nino Southern Oscillation (ENSO) and India can escape drought.
But what is the relationship between El Niño and the Indian drought? How much damage can they do to Indian agricultural production and, in turn, food prices? Indian rainfall data from 1950 to 2022 shows that there were 15 drought years when the weight of all rainfall in India was minus 10 percent LPA. Of the 15 drought years, 11 coincided with El Niño. This indicates a strong relationship between El Niño and the Indian drought. But not all El Niño years have necessarily resulted in droughts. So far, IMD has confirmed that despite El Niño, it will rain normally in India. We hope IMD’s weather modeling is correct. But as ancient wisdom suggests, hope for the best, but be prepared for the worst. We considered a scenario of possible drought or less than normal rainfall and attempted to calculate the possible shortfall in the production of food grains. We suggest preventive policy measures that can be taken at this point.
It should be noted that of the 15 droughts since 1950, three years of drought – 1965, 1979 and 2002 – were the most damaging in terms of percentage decline in food grain production (19 percent, 16.8 percent and 17.9 percent). cent, respectively) over the previous years. However, the 2002 drought saw the largest decline in the absolute amount of cereal production, amounting to 38 million tonnes (metric tons). If India went to the global markets to import 38 metric tons of food grains, one can imagine how global prices would have reacted. Subsequent droughts, however, were milder.
For example, drought in 2014 reduced only 13 metric tons of food grain production, which was only 4.9 percent from the previous year. Drought in 2015 led to a decrease of only 0.5 million tonnes (0.2 percent) in food grain production compared to 2014 production, which was already a year of drought. Obviously, the extent of the damage depends on the severity of the drought, which in turn can be affected by the severity and timing of El Niño and whether the IOD is positive or negative at that time of year. Over a longer period, irrigation cover for food grains has increased, from 18 percent in 1951 to 53 percent in 2015, also providing drought protection.
On the policy front, the government has been active in taming food prices. Wheat exports have been banned and storage restrictions are now imposed on wheat traders and processors. Rice exports attracted a 20 percent export duty on ordinary rice. Most pulses have also been subject to export controls/restrictions and storage restrictions. Recently, the government has also initiated open market operations for wheat and rice with the aim of bringing down grain inflation, which is still hovering in double digits. Strong open market sales of wheat by the government of about 3.4 metric tons ahead of the start of the wheat buying season in April helped lower wholesale prices of wheat significantly. This, in turn, enabled the government to purchase 26 million tons of wheat.
However, some vegetable prices are completely out of control – tomatoes, ginger and chili peppers for example. It appears that the government’s “green operation”, which began with tomatoes, onions and potatoes (TOP) and extended to other vegetables, has not achieved its higher prices. It needs a serious revisit, and our research in this area suggests that it should be taken out of the scope of the Ministry of Food Processing and entrusted to an independent body specializing in vegetable value chains with a clear mandate to stabilize at the highest levels. Prices and output, increasing the share of producers in consumer’s rupees, are somewhat similar to the National Dairy Development Board (NDDB) in the case of milk.
In the case of cereals and pulses, we suggest increasing market operations for rice until the new crop hits the market. There is ample rice stock with FCI, well above buffer stock standards. But for wheat, the government needs to keep its reserves and use them wisely during the November-March period, when demand peaks. Import duties on wheat should be reduced from 40 percent to 10 percent to increase supplies. Trade estimates for wheat production are much lower than the government estimate of 112 million tons. In the case of pulses, especially yellow peas, the import duties should be reduced to only 10 percent. We hope these measures will help contain food grain prices.
Gulati Distinguished Professor and Thangaraj ICRIER Research Associate. Opinions are personal
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