Lower yields may send India’s inflation rate to an eight-month high
SARVE, India (Reuters) — Farmers in India run the risk of planting too much, too fast in the current monsoon season as an unexpected dry spell starts to wilt crops across the country.
The development raises fears of lower yields and surging food prices in a mostly impoverished nation.
Food prices are a political hot potato in India, where more than a quarter of its population of 1.2 billion people live on 74 cents or less per day. In fact, high food prices have already pushed the country’s June consumer inflation to an eight-month high.
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It’s why the ongoing dryness in central, western and southern India, which are key producing regions for cotton, soybean, corn, sugar cane, pulses and rice is a big cause for worry. Poor production of summer crops would further lift food prices and restrict the central bank from cutting lending rates, which is crucial to boosting Asia’s third-biggest economy.
“The outlook for inflation over the next few months depends squarely on monsoon rains for the remainder of the season,” HSBC said.
India’s farm sector accounts for 15 percent of its economy and the monsoons are crucial, considering that half the country’s farmland lacks irrigation.
A heavy downpour early last month had lifted the country-wide rain surplus to 28 percent, raising farmers’ hopes of a good June-September monsoon season despite forecasts for the emergence of an El Nino weather pattern.
However, rain is now six percent below normal following the dry spell with the deficit as high as 52 percent in some regions, weather department data shows.
“Sowing has nearly stopped due to the dry spell. Even sown crops are under severe stress,” said Vikas Deshmukh, agriculture commissioner of Maharashtra state, India’s second-biggest cotton and soybean producer and its top sugar producer.
Indian farmers had initially rushed to seed their crops after ample rain, bringing total planting levels to 110 million acres by July 10, up 62 percent year on year.
However, the higher number does not give a correct picture because last year’s monsoon was delayed and so was seeding, said B.V. Mehta, executive director of the Solvent Extractors’ Association.
In 2013, when rains were ample, farmers had planted nearly 128.5 million acres by this time.
The fate of a single crop can be the difference between life and death for millions of farmers in India, where three fifths of the population depend on agriculture for their livelihood.
Earlier this year, dozens of debt-laden farmers committed suicide after damage from unseasonal rain during the harvest of the winter crop. A poor summer crop would exacerbate the pain for prime minister Narendra Modi’s government, which is struggling to address rural distress.
“I can sow crops once again when we get rains, but I don’t have money to buy seeds,” said Narayan Patil, a farmer from Sarve village in Jalgaon district, 400 kilometres northeast to Mumbai.
The outlook is grim for many farmers. The official forecast remains that this year India could suffer its first drought since 2009 because of El Nino, which can lead to scorching weather across Asia.
Maximum temperatures in central and southern India are currently up to 6 C above normal, hurting crop growth, said Nitin Kalantri, a pulses dealer.
A drop in domestic production could lift overseas purchases of edible oils and pulses by India, the world’s biggest importer of both, while limiting its rice and cotton exports.
