Will El Niño weaken India’s economy?, Pg10

Key Highlights:

• The India Meteorological Department (IMD) has forecast "below normal" rainfall for July, following a 40% deficit in June.
• Union Agriculture Minister Shivraj Singh Chouhan warned about the potential impact of a 'super' El Niño.
• A poor monsoon threatens agricultural output, reduces rural income, and risks increasing food inflation.
• India's foodgrain output for 2024-25, which was 357.73 million metric tonnes, is now at risk.
• The Reserve Bank of India cautioned that an adverse south-west monsoon could weigh on the domestic growth-inflation outlook.

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Detailed Insights:

• Agriculture contributes one-fifth of India's Gross Value Added (GVA) and supports over half of the population.
• Farm incomes could decline by up to 10%, impacting the rural non-farm sector and industries reliant on rural demand.
• A combined El Niño-plus-drought scenario might reduce India's GDP growth by 20-65 basis points.
• Historically, several severe droughts in India, including in 1972, 1982, 2009, and 2015, coincided with El Niño years.
• The government approved a ₹41,533 crore Nutrient-Based Subsidy for Phosphatic and Potassic fertilizers for the kharif season.
• A shortfall in agricultural output could necessitate buffer stock releases and imports, potentially widening the Current Account Deficit and pressuring the rupee.
• India's agri-exports, which showed an 8.2% CAGR between fiscals 2020 and 2025, also face a significant threat.
• 315 districts are vulnerable to a poor monsoon, with 111 in 12 states being of primary concern due to inadequate irrigation.
• Reservoir storage levels, monitored by the Central Water Commission, are currently below normal compared to the previous year.
• Experts advocate for a shift from crop insurance to ex-ante risk reduction through public investment in drought-resistant crops and enhanced irrigation facilities.

Key Concepts Involved:

• El Niño: A climate pattern characterized by the unusual warming of surface waters in the eastern tropical Pacific Ocean, affecting global weather.
• Monsoon: A seasonal prevailing wind in South Asia, bringing heavy rainfall crucial for agriculture.
• Kharif Season: The summer cropping season in India, typically from June to October, dependent on monsoon rains.
• Gross Value Added (GVA): A measure of the value of goods and services produced in an economy, industry, or sector.
• Current Account Deficit (CAD): Occurs when a country's total imports of goods, services, and transfers exceed its total exports.
• Nutrient-Based Subsidy (NBS): A government policy providing subsidies on fertilizers based on their nutrient content, allowing market-determined prices.
• Central Water Commission (CWC): India's premier technical organization in water resources, responsible for control, conservation, and utilization of water.