The shortfall in rains is the worst in South India and it will affect rice and oilseeds production as well as tractor sales

Farmers sow paddy in a field at Meni village in Shirala Taluk of Sangli district.Photo)(
  • The total rain from south west monsoon has been 40% less than the average.
  • The deficit is as high as 56% in south India and farmers have been asked to avoid sowing for crops like rice that need a lot of water.
  • Central India comes a close second with a rain deficit of 41% until June 19.
  • The crisis in rural India may become a significant factor in the upcoming budget.

India is already suffering from a severe water shortage in many parts of the country and the rain Gods have not been merciful yet. That would put pressure on the Narendra Modi government, particularly on Finance Minister Nirmala Sitharaman, ahead of the upcoming budget to ensure the rural distress in the country does not worsen any further.

The total rain from south west monsoon has been 40% less than the average. The deficit is as high as 56% in the southern peninsula --Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, and Goa. The central parts of the country, states like Madhya Pradesh, Maharashtra and Chhatisgarh, come a close second with a rain deficit of 41% until June 19.

The shortage is therefore the worst in the rice growing areas and therefore the farmers have either delayed or reduced the sowing of crops like rice, sugarcane and cotton, all of which need a lot of water, according to government data. This is part of the government's contingency plan in the 648 worst-hit districts of the country.

What's worse, farmers have to pay up to 10% more for fertilisers this sowing season, than what they paid last winter, thanks to a rise in global prices for potash due to stronger demand, the key raw material, and a weaker rupee.

Tractor sales

Expectations of a poor monsoon also affect the purchase of farm equipment like tractors. The impact has been visible already in the 15% fall in tractor sales in May compared to the same time last year. That's bad news for Mahindra and Mahindra, which makes nearly 31% of its revenue from tractors alone and things have been far from rosy for a while now.

The gloomy expectations have been evident in the share price too, which has lost over 31% in the last one year.

All eyes are now on the budget, and both the country's millions of farmers as well as companies like M&M hope for some sort of relief package that soften nature's blow on the rural economy.

There are some encouraging signs with the President Ram Nath Kovind announcing a ₹25 trillion fund to protect the rural economy. The income guarantee scheme of ₹6,000 a year has been extended to the country's 145 million farmers. India has also appealed to China to lower tariffs on agricultural exports from India.

Rural consumption has already slumped sharply and a poor monsoon may only worsen it. The government will have to think of other measures to support the economic recovery.

There is a lot of bad news that Modi has to budget for this year
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