Rains, Monsoon, Economy and Manmohan

Finally monsoon has showered some raindrops on the national capital bringing relief to its residents. TV news channels, though, made people believe as if entire India is now covered by this very erratic monsoon. This is one of the negative fall-outs of almost all the major news channels being based in New Delhi. Anyways, Delhi needed rains, it has got the first spell of monsoon spray. Nice. It has brought the soaring temperature down making weather unusually pleasant for Delhi. It becomes overwhelming here. But, monsoon this year does not present a rosy picture. Till now only 49 percent monsoon rains has been reported by the IMD, whose forecasts and estimates are hardly ever taken seriously by aam aadmi. People are already talking of drought in regions, which are crucial for foodgrains' production.

A drought in Delhi won't affect our kitchens and stomachs much but a similar situation in Maharashtra, Uttar Pradesh, Punjab, Haryana and others would throw not only our individual family lives but the economy of the nation completely out of gear. Already, four farmers have ended their lives (in past 48 hours) in Vidarbh as monsoon kept them waiting. The vagaries of monsoon and the possibility of a drought this year are going to aggravate the splitting headache for Prime Minister Manmohan Singh, who has just taken over the mantle of finance ministry. He is already losing his sleep over a slowing economy, falling rupee, rising food inflation and escalating fiscal deficit. On the top of it, the government has got the inertia of policy paralysis.

Many believe that a deficient rainfall this monsoon will further paralyze this UPA government and the simmering of an impending economic reforms would be kept under the wraps for some more time. The first issue that plagues the Manmohan Singh government is diesel pricing. The economists suggest the UPA government to decontrol it and/or, thereby raise the diesel prices. But, this will be another bolt from the blue for the farmers, who are a key voting bloc for the Congress and its allies as they will have to use diesel in the absence of monsoonal rains to run pumps for irrigation.

The use of more diesel would be a big worry for the government. Diesel accounts for more than 40 per cent of nation's oil demand. Farmers can increase the demand for diesel substantially if monsoon does not improve vastly and quickly. Then, keeping diesel prices at the present level will make it difficult for the government to keep fiscal deficit at the projected 5.1 percent of the GDP.

This means we are gearing up for another bad fiscal year. The first three months of the current financial year have already seen economy slumping to its lowest in almost a decade. Most of the credit rating agencies have cut down India's credit outlook making foreign investment difficult. Obviously, Manmohan Singh, the economist, has a daunting task to accomplish.
Weak monsoon makes a dent into farm based incomes, loosely, rural India's incomes. This, in turn, will hit adversely the markets of almost everything--- from chips and cold drinks to TV and motor vehicles, and from gold to computers.

Failing agriculture in India would also make agricultural produce in international markets costlier much to the discomfort of many poor countries of Africa and Asia. The recent example of this phenomenon was witnessed in 2009, when a severe drought in India's sugarcane producing states forced it to lift large quantity of the sweetener not only from its biggest producer, Brazil but also from other markets making benchmark New York futures climb to a three-decade high.

Monsoon is not a local geographical phenomenon now, it is all pervasive with global economic implications. Let's join Mr Manmohan Singh in his pray to Lord Indra so that He sends normal rain-bearing monsoon clouds over India's foodgrain producing states;it doesn't matter if Delhi does not get rains overflowing its drains.