Here's how rain deficiency impacts the Indian economy | Business Upturn

Here’s how rain deficiency impacts the Indian economy

This article tends to focus upon the unpredicted and the heavy rain deficiency which has impacted sectors across India

August 2023 has been known as the driest month compared to a decade-month rainfall. Though the IMD has predicted an average rainfall in September 2023, it will not cover the deficiency of 36% caused in August 2023. The unpredicted and the heavy deficiency has impacted sectors across India, which this article intends to focus on. 

The main reason for this deficiency in August 2023 has been the El Nino patterns that suppress the monsoon rainfall. EL Nino is when the Pacific Ocean’s surface temperature increases and gets warmer, subsequently impacting the  Indian monsoon. In this, the location at which the EI Nino occurred is indispensable. If the pattern has been observed in the central Pacific Ocean rather than the Eastern Pacific Ocean, the impact would also be more significant on the Indian monsoon. However, it is important to account for other critical regional phenomena like the Indian Ocean Dipole and Madden Julian Oscillation that affect the Indian monsoon. 

The two seasons when the farmers sow the crops are Kharif and Rabi. The kharif is from June to September, and the farmer starts the harvesting in the mid-half of September. The period of two months before the harvesting of any season is significant as the seeds are in a growing stage. In these months, crops like oilseeds, rice, pulses, and sugarcane need sufficient water to complete their flowering stage.

Insufficiency during these two periods would not be covered by the subsequent months as the crop has passed that particular stage. August 2023 rain deficiency could lead to disruption in the food supply chain and would subsequently put pressure on prices and keep inflation risk elevated.

While elevated inflation risks remain, consumers will look for ways to reduce their expenditures. Almost half of India’s GDP comes from the rural economy. About 40% of India’s household is dependent on agriculture, and about two-thirds of it is heavy and is the only source of income. Rural demand has been impacted the most, given the forecast disruption in production and income. One of the major indicators of rural demand is the expenditure on two-wheelers and tractors. Manufacturing companies like Mahindra & Mahindra and Hero Motorcorp have been revamping their volume estimate as the sales have been behind the estimated expectations. 

The vulnerabilities of the rural economy have been reduced through government policies, which have seen a rise in yield improvement, a rising share of linkages and global market linkages. More affirmative actions are needed to uplift the rural demand and prevent disruption due to unpredicted monsoon disruption.