A bad monsoon has always created fears about a slip in GDP growth rate. Now that the India Meteorological Department has said this monsoon will be below normal at 93 percent, the wailing has begun again. The monsoon pundits cite history: Each of three consecutive years of good monsoons saw a 9 percent growth in the economy. But in 2002, when rains were only 81 percent of their long-term average, the growth rate fell to 3.8 percent.
The Benign Employer
When it comes to employment, agriculture is still very relevant. As much as 52 percent of the population depends on farming for livelihood. Good rains put more money in the hands of these people, who then go out and spend on clothes, food, festivities and increasingly, consumer durables. Traditional agriculture still depends on the rains. So, poor rains still lead to reduced earnings, inability to repay crop loans and farmer suicides. Revolution, No More
Agriculture is still caught in the paradigm of the Green Revolution in the 1960s. Much of the gains in yields have come from intense use of chemical fertilisers that have eroded soil quality over the decades. So, agriculture is now caught in a catch 22 situation. Yields, already low by global standards, have begun to plateau or drop despite the use of fertilisers. Unless new practices are established, agriculture will continue to lose its share of the economy. El Niño Effect
El Niño is a climate phenomenon that leads to changes in the temperature of water in the eastern Pacific Ocean. It usually leads to drier monsoons for countries like India and Australia. Many scientists are close to calling 2009 an El Niño year. But a study conducted by the weather office over the period between 1880 and 2005 found that India had normal/excess rainfall roughly half the time an El Niño event took place. So, it could still rain heavily. Amen! Losing Grip
Over the years, India has come to depend on services, which account for more than half of the GDP. Agriculture’s share in the GDP has fallen from 50 percent in 1970 to 17.8 percent in 2007. To that extent, monsoon has become less relevant for economic performance. Agricultural growth has also stagnated at 4 percent or below during recent years, when other sectors saw double digit growth. Yield Factor
Cotton is the only crop which has shown an increase in yield since the 1990s. However, this was not brought about by better rainfall, but by the introduction of genetically modified seeds. While the jury is still out on their environmental impact, they surely have brought agriculture back in the reckoning in India. As for other crops, much more yield could be achieved with much less water if cultivation practices and rain water harvesting are improved.
(This story appears in the 31 July, 2009 issue of Forbes India. To visit our Archives, click here.)