The Hindu Business Line : Making most of the monsoon

FOR THE ECONOMY already on the roll, the forecast of a near-normal South-West monsoon this year should provide a further impetus. Without doubt, a reasonably good spatial and temporal distribution of rains across the country in 2003-04 led to a major rebound in agricultural production, which in turn boosted the confidence of the industry and services sectors. Importantly, a positive outlook for the economy, in tandem with improved global economic growth prospects, has improved the investment climate. Consumer demand, especially in the rural areas, is picking up because of a strident rise in incomes. It is necessary to sustain the growth momentum; a satisfactory monsoon for the second year in a row may just be the recipe for greater success.

Even as euphoric conditions prevail across the nation, not one but two notes of caution are necessary. One on rains and the other on prices. The India Meteorological Department deserves to be complimented for continually honing its forecasting skills. However, despite the overall satisfactory precipitation last year as forecast, several areas, including those in Maharashtra, Karnataka and Tamil Nadu, faced serious moisture-stress resulting in crop losses. It would be foolhardy to assume that all regions will enjoy good precipitation. Rather than create complacency, the forecast of a good monsoon should spur policy-makers, agriculturists and others to reap the maximum out of nature's munificence. Input delivery systems have to be strengthened. It is necessary to continually monitor rainfall and be ready with contingency plans. Unfortunately, small and marginal farmers, most of whom hold rain-dependent land, hardly have any fallback position in the event of a drought which can occur early-, mid- or late-season. At the same time, ironically, there are regions and crops that use up excessive amounts of water. User-charges have to be levied and the use rationalised. Conservation and scientific water management are the key to sustained growth in farm output.

The second note of caution relates to prices. Whether foodgrains, oilseeds or cotton, farmers received remunerative prices in 2003-04, thanks to a buoyant domestic market. Domestic prices were impacted by a bullish trend in the global markets because of crop losses and a surge in consumption demand in parts of the world. High farm prices usually tend to encourage production. If higher farm output in India coincides with a strong recovery in world production next season, market prices can collapse. Lower world prices (and firming rupee) may also hurt farm export prospects. The new government that assumes office has its job cut out. With the entire nation in election mode, regrettably it is going to be yet another year when the minimum support price for the kharif season will not be announced almost until the start of planting. So much for everyone's concern for the `poor farmer'! Currently, all macro-economic indicators are favourable. The conditions for sustaining the virtuous cycle of income-demand-investment-employment appear propitious. A strong government at the Centre pursuing growth-oriented policies should complete the picture nicely.