Page 8 - CII Artha Magazine

Focus Story

Truant At CRISIL, we measure the

impact of monsoons via its
proprietary index Deficient
Rainfall Impact Parameter
(DRIP) as rainfall data does
Monsoon not tell the complete story.
DRIP measures the impact by
combining the shock that
arises deficiency in rain
(measured as deviation from
and India’s LPA) with the vulnerability of
region (measured as irrigation
buffer).

In terms of precipitation,
Growth among major states, rains have
been deficient in Bihar (-27
per cent below the LPA),
Jharkhand (-33 per cent), and
Kerala (-41 per cent). But
Prospects Jharkhand, Maharashtra,
when measured via DRIP,
Madhya Pradesh, and
Karnataka show high
vulnerability.

With El Niño conditions
getting entrenched, rains in the
rest of the season have
IN AUGUST, HEADLINE become crucial to lift
INFLATION CAME agricultural output and rural
DOWN TO 6.8 PER demand and subdue inflation.
T he deficit in rainfall norm now rather than an CENT WITH FOOD Although inflation spiked to
exception. The good part is,
continues as we inch
closer the end of the this has not had any INFLATION AT AN 7.4 per cent in July and CRISIL HAS RAISED We expect GDP growth to IMPACT OF 250 BASIS
UNCOMFORTABLE 9.9
southwest monsoon season, meaningful impact on PER CENT remained above 7 per cent in ITS INFLATION slow to 6 per cent in the
which runs from June to agricultural output or inflation. August, this was largely FORECAST TO 5.5 PER current fiscal from 7.2 per POINTS RATE HIKE
September and provides localised to food. In July, food CENT FOR THE cent in the last fiscal as the FROM RBI WILL BE
over 70 per cent of India’s For example, agricultural GDP inflation rocketed to 11.5 per CURRENT FISCAL lagged impact of 250 basis FELT IN THE SECOND
annual rains. growth has been healthy in the to the development of EL The august rainfall this year at cent, whereas fuel and core fell FROM 5 PER CENT points rate hike from RBI will HALF WHEN THE
past four fiscals despite the Niño conditions which are 36 per cent below LPA was 3.6 per cent and 4.9 per cent, EARLIER be felt in the second half when
The season is crucial because uneven distribution. associated with dry conditions. the weakest in 123 years. respectively. In August headline the global slowdown is GLOBAL SLOWDOWN
only 52 per cent of India’s Additionally, the backdrop has inflation came down to 6.8 per expected to intensify. India’s IS EXPECTED TO
gross sown area is irrigated. Foodgrain production rose been of high food inflation. Of This kharif season, sowing has cent with food inflation at an will have to keep its eyes merchandise exports have INTENSIFY
steadily and is estimated to the six El Niño years since been the weakest for pulses uncomfortable 9.9 per cent. peeled for developments on been contracting for last six
Overall, rains up to September have it a record high in 1991, agricultural growth (-8.6 per cent lower than last this front. If sustained, food can months and this will continue
12, 2023 are 10 per cent 2022-23. Farmers seem was negative in four, year as on September 9). In If we take food out, headline become a concern because it through the rest of the fiscal.
below the long period average to be gradually and retail contrast, sowing picked up for inflation was 4.8 per cent in can then spill over to other Rains also influence ground
(LPA), which puts it in the adjusting their inflation was rice (2.7 per cent). both July and August. Food components and steer the Monsoon performance, water and reservoir levels for
deficient category. sowing patterns above 6 per inflation is, therefore, the headline CPI inflation above therefore, adds another risk to the rabi crops, which are
over time, cent in only With overall sowing at last major worry. Within food, the RBI’s target. And this can output and inflation. If rains largely irrigated. On a positive
Equally worryingly, their according to three. year’s levels, the rains in rest of while the spike in vegetable constrain monetary policy as remain suboptimal in rest of note, the Indian Metrological
distribution over time and monsoon the season become critical for prices is correcting, that in central banks do respond to September, some adverse Department expects the rains
geographies has been patchy conditions. protecting the yields of crops foodgrains (cereals and pulses) inflation when it starts impact on agricultural GDP to improve September. But till
with some parts of the that have been sown. remains in double digits. becoming generalised. We and overall GDP too can play September 12, cumulative
country getting excess rains But this fiscal is a have raised our inflation out. And if inflation stays high, rains were deficient.
and others very little. bit different from Even if food inflation is forecast to 5.5 per cent for interest rates too will stay Fingers crossed for rest of the
the past four due localised right now, the this fiscal from 5 per cent higher for longer. season, therefore.
To be sure, some abnormality Mr Dharmakirti Joshi, Member, CII Economic Reserve Bank of India (RBI) earlier.
in the rainfall pattern is a Affairs Council & Chief Economist, CRISIL

08 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 09
QUARTERLY JOURNAL OF ECONOMICS
QUARTERLY JOURNAL OF ECONOMICS
SEPTEMBER 2023 SEPTEMBER 2023