El Nino casts shadow on Indian agriculture

The government is also worried. The Finance Ministry’s latest monthly review of the economy flagged the El Niño risk, pointing out: “It is important … for El Niño conditions to create drought conditions and reduce agricultural production and raise prices, land -It is important to remain vigilant to potential risks such as political developments and global financial stability.”

If El Niño strikes at the end of the year, as meteorologists elsewhere in the world also predict, it could end the good monsoon run of the past four years, though it is not certain. India has had good monsoons even in El Nino years, and less rainfall in years when El Nino was not prevalent (chart 1),

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Graphic: Mint

But the event is strong enough and its potential economic effects severe enough for meteorologists around the world to closely monitor its progress. If El Nino materialises, what can we expect for the Indian economy in the coming year?

little boy

El Niño (in Spanish for ‘the little boy’) refers to a change in weather conditions between the eastern Pacific Ocean near the coast of South America and the western Pacific Ocean near Australia and Indonesia. In a ‘normal’ year, an area of ​​high pressure develops over the western edge of the Pacific Ocean, and an area of ​​low pressure develops over the eastern Pacific. This pushes strong winds (the so-called ‘trade winds’) eastwards towards the coasts of Indonesia and Australia, carrying warm water with them, and causing rain near those countries.

These weather conditions can also improve or worsen the Indian monsoon. If the pressure difference between the eastern and western Pacific widens, the Indian monsoon could be wetter than normal, as the trade winds intensify—a phenomenon known as La Nina. This is what we have seen in the last three-four years.

El Nino occurs when this pressure difference weakens. In this case, the low pressure moves away from Indonesia and back into the eastern Pacific, slowing the trade winds and causing weaker rainfall, and possibly even drought in Australia and Asia.

While it is not certain that an El Niño year can cause monsoon rainfall to be severely below normal, the link is quite strong. A 2014 ICRIER working paper by Shweta Saini and Ashok Gulati found that from 1950 to 2013, there were 14 drought years, 11 of which occurred in El Niño years.

But of the 23 El Niño years in that period, only 11 were dry. The authors concluded, “Therefore, it is very clear that not all El Niño years turn into droughts for India and not all (but most) Indian droughts occur in El Niño years.” However, the authors also found that all six drought years occurred after the 1980s in El Niño years. Interestingly, the most extreme El Niño year ever recorded in 1997 was a year when the Indian monsoon was normal, despite dire predictions to the contrary.

The less-than-perfect cause-and-effect relationship between El Niño years and drought in India is due to several other weather patterns that can sometimes serve to offset the effects of El Niño. For example, there are distinct differences between sea surface temperature and air pressure over the western and eastern Indian Ocean, similar to El Niño patterns. Changes in these pressure and temperature differences in the Indian Ocean can offset or strengthen the effect of El Niño on the Indian monsoon.

Drought or not, the average rainfall is less in an El Niño year. As chart 2 shows, agricultural GVA (gross value added) is highly correlated with expected, actual rainfall in any given year falling above or below the long-term average.

What is the effect on GDP? A 2015 IMF Working Paper by Paul Cashin, Kamir Mohaddis, and Mehdi Rasi looked at the macroeconomic impact of El Niño around the world. For India, they found that an El Niño event caused GDP to shrink by 0.15 percentage points in the first quarter following the event, with the effect increasing by a cumulative amount of 0.25 percentage points a year later.

The authors found, “The negative impact of El Niño is muted in India due to several mitigating factors.” Among them is the declining share of agriculture in India’s GVA and the increasing share of rabi (winter) crops in agriculture. “Furthermore, due to more developed agricultural markets and policies, increasing agricultural yields, and climate-related early warning systems, farmer are able to switch to more drought-resistant and shorter-duration crops (with government support),” the authors noted.

complicate the picture

But this assessment is optimistic. For example, studies show that El Niño, causing more drought and higher temperatures, increases the demand for both fuel and non-fuel goods, which in turn increases the prices of the goods. The authors found that an El Niño event caused oil prices to increase by 13.9% over the following four quarters, and non-fuel commodity prices by 5.3% over the same period. Thus, it also filters into inflation, with the cumulative increase in inflation after four quarters estimated to be around 0.6 percentage points.

Furthermore, while the authors of the IMF paper point to the declining share of agriculture in overall GDP as an indicator that El Niño effects may be more muted, the wider impact of weak rainfall or drought on the rural economy and rural employment is still complex. Is. And it can be far reaching.

This is especially post-Covid, given that the proportion of the labor force in agriculture actually increased from 42.5% in 2018-19 to 45.5% in 2021-22, reversing the trend of movement from agriculture to labor over the past decade Gave. Thus, growth in the agricultural economy has become more important, not less, over the years.

During the last El Niño episode between 2014 and 2016, agricultural growth shrank by less than 1%, but rural wages remained flat in real terms for a long period of time. Even as agricultural growth improved after 2016, rural wages, after being adjusted for inflation, remained subdued, according to a 2019 RBI paper ‘Rural Wage Dynamics in India: What Role Does Inflation Play? ‘ mentioned in the title.

The total increase in agricultural wages for men varied from 0% to about 6% between November 2014 and November 2022 among different categories of labor (except for horticulture workers, for whom there was an increase of about 11%). Outside of agriculture, in the important sector of rural manufacturing, which has served as a major employer over the past decade, wages for men have actually fallen by about two percentage points.

While the weakness in rural wages may have to do with factors other than weak rainfall (for example, demonetisation), the net effect is that El Niño, if it occurs, will occur at a particularly weak time. Rural economy.

There are other indicators that the rural economy is not doing well. For instance, market research firm Nielsen IQ in December pointed to a sharp disparity between FMCG rural and urban markets for the September 2022 quarter. While urban markets were growing, rural markets were actually declining. In fact, the only way FMCG companies have actually seen growth in their toplines is by increasing prices – volume growth between late 2021 and late 2022 was negative for rural areas, though it saw a slight increase in urban areas Went.

The auto sector is another indicator. The Federation of Automobile Dealers Association (FADA), while reviewing vehicle sales for the last quarter of 2022-23, said that all categories of vehicles except tractors saw a double-digit growth in sales. For March, two-wheeler sales, FADA noted, were positive. However, it said, “Although the two-wheeler segment exhibited year-on-year growth, it is well below pre-pandemic levels, indicating that rural India is still bearing the cost of high inflation.” Incidentally, FADA also said that, “for the third month in a row, US government agencies have warned of the possibility of the arrival of El Niño later this year, which could lead to poor monsoons, hampering rural India’s growth potential.” Might.”

Climate change

The link between Indian agriculture and El Nino is old. Geographer Mike Davis in his book late victorian cataclysmsDescribes in vivid detail how a series of devastating famines followed El Niño events in the late 19th century in India and around the world, killing millions of people.

what about the future? In the coming years, the complicating factor is certainly climate change. Will there be more or fewer El Nino years?

a scientific report published in Nature In 2016 Sarita Azad and M Rajeevan suggested that we may see more frequent El Niño events in the future. In addition, model simulations suggest that “frequent El Niño events could trigger more droughts in India”.

The main impact of such drought on agricultural production is certainly quite severe. But such events can also bring about far-reaching changes in the rural economy. For example, in a paper on the impact of drought on agricultural labor by men and women, Farzana Afridi and co-authors found that after a drought, rural women were 7.1% less likely to be employed than men, but 80% less likely to be employed. % is likely to be higher. look for work. Women saw a 19 percent greater reduction in work days than men in a drought year.

Also, while men are better able to replace lost work on the farm with other work, in rural areas, women overall are much less able to make that switch. The authors say, “Therefore, while men diversify into non-agricultural jobs to cope with the drought, women do not work and their real farm wage income (provided they are employed on a farm) declines by 38.1%. Is.” ,

IMD Director General Mrutyunjay Mohapatra told Peppermint The impact of El Niño on this year’s monsoon is likely to be minimal – the IMD now sticks to its forecast of a normal monsoon, said in a recent interview. If this happens then it is good news. But, even if the Indian monsoon goes well and agricultural growth is strong, there is little guarantee that El Niño will not return in future years, or that its effects on Indian agriculture and society will not be more far-reaching.

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Updated: May 05, 2023, 12:51 AM IST