12 September 2017 12:34:43 IST

How the monsoon impacts the farm sector

Scanty rains may hit foodgrain output and agri-input prices, but higher MSP may be a mitigating factor

The contribution of agriculture to the country’s overall economic activity has been declining steadily over the last several decades. Agriculture and allied activities’ share in the country’s Gross Value Added (which is the total revenue from all goods produced including subsidies) has fallen from 23.02 per cent in 2000-01 to 17 per cent in 2015-16.

Yet the farm sector’s importance cannot be underestimated, given that 54.6 per cent of the country’s population is dependent on agriculture and allied activities for income generation (as per 2011 census).

Among the many factors determining the prospects for agriculture, the monsoon has been the foremost one, given that almost two-thirds of the country’s cultivable land is rainfed. Conventional wisdom suggests a direct relationship between monsoon and agriculture. And historical data reinforces the strong link between monsoon and food-grain production.

Food-grain output

In 2009, when the South West monsoon rainfall was 21.8 per cent below the long-term average, food grain production slipped 7 per cent.

Likewise, in 2014 and 2015 when India had two consecutive years of deficient monsoon rains —12 per cent and 14 per cent below the long period average in 2014 and 2015 respectively — total food-grain production fell by 4.7 per cent and 3 per cent respectively.

However, production rebounded in 2016-17 to a record level of 273.78 million tonnes, which is an 8.7 per cent increase over the previous year, after a better monsoon spell in 2016 (3 per cent below the long-period average).


Seeds, fertilisers

While the overall food-grain production trend has kept pace with the monsoon rainfall, the overall consumption of key agri inputs —fertilisers, seeds and pesticides — historically has not always responded directly to the south-west monsoon rainfall pattern. For instance, even in 2009, a drought year, seed distribution rose 19 per cent.

Similarly, in 2012-13, when the South-West monsoon rainfall was 7.5 per cent below normal, the distribution of certified seeds grew by 6.3 per cent. So also in 2014 and 2015, when the country experienced two consecutive spells of below normal rainfall, seed distribution remained steady and grew marginally by 0.6 per cent and 0.3 per cent respectively.

The resilience in seed distribution is because it is the first input in the farming process and the purchase happens ahead of the monsoon. So, is there a lag effect here? And does a bad monsoon impact demand in subsequent years? The historical data do not convincingly reinforce that trend.

Consider this. Seed distribution in 2010-11 grew at a strong 7.9 per cent, after the drought in 2009. Likewise, in 2015-16 too, certified seed distribution grew 0,3 per cent. However, 2013-14 was an exception; when seed distribution fell 3.8 per cent that year.

The second input fertiliser has been fairly immune to the vagaries of monsoon. For instance, fertiliser consumption grew 6.3 per cent in 2009-10. Similarly, in 2014-15 and 2015-16 too, fertiliser consumption increased by 4.5 per cent and 4.6 per cent, despite weak monsoon spells. However, similar to seeds, 2015-16 was an exception for fertilisers too. That year saw fertiliser consumption fall by 8.1 per cent.

If fertiliser consumption remained unaffected by monsoon perils, this was primarily for two reasons:

First, heavy subsidy by the Government on the sale price cushions against any adverse impact. The subsidy is 40-70 per cent for different types of fertiliser, the highest being for urea. Second, but for organic nutrients and inputs, the use of which, though growing, is still low in India, there is no alternative to chemical fertilisers.

Pesticide use

Fertiliser and seed sales have remained steady even during bad monsoon years. But how is it with pesticides? The story with pesticides is a little different from that of seeds and fertilisers, given that their application comes much after seeds and fertilisers.

Pesticide sales share a close correlation with monsoon performance. For instance, in years of deficient monsoon rains, the consumption of pesticide has declined too. In 2009-10, pesticide technical sales dropped by 4.7 per cent. Similarly, in 2012-13, 2014-15 and 2015-16, sales declined by 13.9 per cent, 6.9 per cent and 10.2 per cent respectively. A weak monsoon and crop loss due to scanty rainfall do impact the demand for pesticides.

While the historical trend shows a mixed impact of monsoon on agri input sales, other factors are also at play, such as government support by way of higher MSP and increased realisation due to a lower crop output, which may insulate farmers from yield loss to some extent.

Given that the monsoon rainfall has been adequate this year, just 5 per cent below the long-period average, strong demand for agri-inputs and expectation of a record food-grain output has brought agri stocks back in focus.