While the world is fixed on the financial crisis, there has been little attention on the concerns coming through on our agri front. Latest govt. estimates of kharif crop show negative growth over last year - this has important implications for food, inflation and imports positions ahead. Except for rice and jute, all other crops register lower output this year. What is interesting is the play of factors that has resulted in this situation. Though the monsoon has been normal this year, this is a typical statement that shows the fallacy of averages.

Kharif is the first crop season of the year, which accounts for little more than half the foodgrain output in the country. (Wheat is a rabi crop, its output features in the winter season.) It didn’t rain when it was sowing time for kharif crops in July in large parts of the country in the south and the west. With most of the crop rain-fed, there was a heavy demand for irrigation though pumps. But on one hand there was a heavy power shortfall and on the other ,with the crude prices going through the roof and govt. fuel policies upsetting the oil marketing companies, diesel shortages prevented farmers from watering their crop at a critical time. Net result: estimates of acreage sown are down for all crops except rice and soyabean.

And then it poured in August and September, causing damage in the fields. In our last newsletter we wrote of the impact of the Bihar floods on agri output in India. Now the govt. has estimated 22 lakh hectares affected across India with Orissa, UP, Andhra and Bihar leading in losses, others like Punjab, Haryana, West Bengal, Assam etc, also figure in the list. This has affected rabi crop sowing this month as the soil is waterlogged.

What could the govt. have done? These are problems created by long term neglect – dependence on rain, lack of power, bad fuel policies that leave budgets bleeding, inadequate disaster management and weak support policies..the list is long. Meanwhile the govt has hiked minimum support prices for all kharif crops by huge amounts, there has been a 30-40% rise in MSPs. Announced well after the sowing season to influence farmers decisions, this will have its impact on domestic prices. Prices are bound to be hit. Global food markets are significantly influenced by India’s output numbers – possibility of imports by India raises prices abroad. Coupled with a lower rupee and higher imports, the scenario ahead is clear to all.

P.S. We now begin our fourth year of this newsletter. It’s our aim to keep looking ahead and point out the emerging problems and strengths in the economy. We would like to thank all our readers for their support and feedback.

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