Economists expressed concern that lower rainfall could impact growth and government should be ready with appropriate measures
R. Suryamurthy – New Delhi
An over 35 per cent deficiency in rainfall has led to delayed sowing of key crops such as paddy, oilseeds and pulses.
Economists expressed concern that lower rainfall could impact growth and the government should be ready with appropriate measures.
Policymakers in North Block and other ministries are on high alert to the possibility of the dreaded El Nino hurting the economy in the second half of the fiscal year.
Sonal Varma of Namura said: “On the policy front, fiscal and supply-side interventions are the first lines of defence.
“The government has already announced open market sales of wheat and rice (at lower prices) and imposed stock limits on wheat and pulses (to prevent hoarding), and more such measures are likely to follow.”
“There could also be a fiscal impact via measures such as expanding the scope of farm income support, among others, with an eye on the upcoming state (Q4 2023) and general elections (Q2 2024). We see a limited role for monetary policy unless an escalation of food inflation triggers higher core inflation and inflation expectations.”
“At the margin, higher inflation, if it materialises, could delay the timing of the first rate cut by a quarter, compared to our current baseline of the rate easing cycle starting in October this year.”
She said a persistent El Nino could have significant economic effects as it can result in below-normal rains when summer crops are sown.
“Relative to our baseline 2023 GDP growth forecast of 5.9 per cent, GDP growth could be 20bp and 40bp lower under the mild and severe scenarios, respectively,” she said.
The area under paddy is down nearly 35 per cent to 10.77 lakh hectares in the kharif (summer-sown) season.
The slow progress of the monsoon is likely to cause a delay in the sowing of oil seeds, the Solvent Extractors Association of India (SEA) said.
Ajay Jhunjhunwala, representing the SEA, pointed out that the delayed onset of monsoon in Kerala, coupled with slow advancement in other states, has resulted in the delayed sowing.
Fuente: The Telegraph