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Drought Risk Looms But GDP To Grow At 6% : FM

11 August, 2009

More than a quarter of India’s districts are facing the threat of drought and the sowing of crops nationally is 20 percent lower than in the previous year, Finance Minister Pranab Mukherjee said on Tuesday.

While many of these districts are not major crop producers, the minister’s statement underscored growing government concern that a weak monsoon could reduce output of crops like rice and dampen economic growth already hit by a global recession.

After the driest June in 83 years, the annual rains have been more than a quarter below below normal this season.

The minister said he expected the economy to expand more than 6 percent in 2009/10, in line with the central bank’s outlook, although some private economists have warned that the risk is to the downside given the poor monsoon performance.

“Monsoon situation is still erratic,” Mukherjee told reporters. “One hundred and sixty one districts have been declared drought prone. So far as sowing is concerned, 20 percent would be down,” he said. India has 604 districts. He did not specify the drought-prone districts.

The rain deficit since June 1 worsened to 28 percent at the weekend, raising fears that the season may turn out to be as bad as 2004 when summer crop output fell 12 percent after a drought. GDP fell to 7.5 percent that fiscal year from 8.5 percent in the previous year.

The rains are vital for sugarcane, oilseeds and other crops, although the impact has been more severe for certain crops — particularly rice — than for many others. A feared shortfall in the sugar harvest has lifted global prices to near record highs.

Mukherjee said the government was ready to manage a drought and a contingency plan was also in place.

“Of course, always there is a contingency plan,” the minister said. “There is no point of pressing the panic button because you will go and start chanting drought, drought, drought and it will have an adverse impact,” he said.

Among measures the government could take to mitigate the situation are to raise imports and curtail exports. It has already stepped up efforts to buy more sugar and has banned wheat exports and restricted rice shipments.

“Fortunately, Punjab and Haryana have extensively used the ground water. Bihar and certain other states, there are shortfalls,” Mukherjee said.

Mukherjee was also confident that targets for direct tax receipts for the 2009/10 fiscal year would be surpassed.

GROWTH THREATENED

Asia’s third largest economy expanded 6.7 percent in the last fiscal year, sharply lower than the 9 percent or more it grew in the previous three years, as the global economic crisis took a toll.

“It’s still a budding recovery so the deficient monsoon has overshadowed the recovery process,” said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai.

“Growth of around 6 percent is feasible despite the fact that monsoon has so far been deficient, but it being above 6.5 percent or in the range of 6.5 to 7 percent looks impossible,” she said.

Last month, farm minister Sharad Pawar told the parliament that four states — Manipur, Jharkahand, Assam and Uttar Pradesh — declared drought in certain pockets. On Monday, the eastern state of Bihar also declared drought in 26 of 38 districts.

Other than Uttar Pradesh, which accounts of almost half of the country’s sugarcane production, other drought-hit states do not make a significant contribution to India’s farm output.


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Drought Risk Looms But GDP To Grow At 6% : FM

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