Ashika Monthly Insight Flip July 2016

FDI - WINDOW OF OPPORTUNITY
percentage value of its LPA: deficient (less than 90),
below normal (90-96), normal (96-104), above normal
(104-110) and excess (more than 110). While the
forecasting agency has acquired new technologies from
time to time, however, the forecasting accuracy has still
been lagging behind international standards. The recent
predictions for the last two years and the one for year
2009, when India experienced severe drought against
expectation of normal monsoon, clearly narrates the story.
India needs to badly count on the accuracy on the
forecasting of IMD especially at a time when India’s food
grain production have been hit last year and the price of
the essential food items, mainly pulses have been
running severely high. The government also had to import
pulses higher in order to fill up the lag in production.
Thus clearly the taming inflation statistics could very
easily go haywire unless the food inflation component in
CPI is lowered, major risk for India in its lower interest
path.
120% IMD April Forecast (%) Actual Rainfall (%)
100%
80%
60%
40%
20%
0%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: IMD, The Hindu
120%
IMD June Forecast (%) Actual Rainfall (%)
100%
80%
60%
40%
20%
0%
Source: IMD, The Hindu
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Thus, instead of making RBI looking as scape goat for
failing to lower the interest rates in the country, the
policymakers should have addressed the basic structural
issues like, the huge dependence on monsoon for
irrigating its arable land. Even today, we look for signs of
good monsoon for boosting agriculture and filling up of
the reservoirs. Since the monsoon is yet to pick up pace,
this has delayed the sowing of rain-fed kharif crops.
According to media articles, so far, an area of 12.49 million
hectares has been planted under crops like rice, cotton,
coarse grains, pulses, oilseeds and cane. This is almost
24% lower than the 16.4 million hectares planted by this
time last year. Thus, the figures are dismal and alarming
both at the same time, however one needs to be patient
and follow the progress of the monsoon in the next few
days. Generally, kharif sowing in India continues almost till
end of July, and seasonal or total area in the June-October
crop season is ~106.2 million hectares. It is a known fact,
how much the south-west monsoon is critical to the kharif
crop season considering over half of India’s farmland lacks
proper irrigation. Moreover, India receives 80% of its
annual rainfall during these four months to boost its water
reservoirs. As per the data from the Ministry of Agriculture,
the area under rice, the main kharif crop, stands at 1.99
million hectares so far, compared to 2.19 million hectares
by this time last year. Pulses have been sown so far in
0.97 million hectares compared to 1.22 million hectares by
this time last year, while coarse cereals have been planted
in 1.76 million hectares, lower than the 1.82 million
hectares planted by this time last year. Cotton has been
planted in 1.91 million hectares compared to 3.49 million
hectares by this time last year. Sugarcane has been
planted so far in 4.44 million hectares, higher than the
area of 4.16 million hectares last year. The higher interest
in sugarcane sowing is probably tracking the higher global
as well as domestic prices and the latest policies drawn.
The sown in figures for Oilseeds however depicts dramatic
fall from the previous year figures. The only hope for
betterment in the figures rests with the strong monsoon
estimates by IMD.
Area sown in million hectare (as of June 24, 2016)
Crop
2016-17 2015-16 % Change
Rice 1.99 2.19 -9.15
Pulses 0.97 1.22 -20.75
Coarse Cereals 1.76 1.82 -3.24
Oilseeds 0.70 2.79 -74.97
Sugarcane 4.44 4.16 6.73
Jute & Mesta 0.74 0.76 -2.12
Cotton 1.91 3.49 -45.31
Total 12.49 16.41 -23.86
Source: Ministry of Agriculture
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