A historical snapshot
Historically, a severe drought caused a major economic crisis. When rainfall became below normal, by say, 15 per cent or more, growth rates of both GDP from agriculture and aggregate GDP declined, and in extreme cases, both became negative. The incidence of unemployment and underemployment increased, especially in the rural areas. Inflation rate shot up to double-digits. The food imports necessitated by the fall in domestic production led to foreign exchange crisis. Finally, the burden of drought relief, borne mainly by the government of India, increased the fiscal deficit. The drought, therefore, became the most important factor behind the economic crisis in 1965-66, 1966-78, 1972-73, 1974-75 and 1979-80.
A Concern on Agriculture and Economic growth
The fact is that agriculture remains the basis of economic growth for most South Asian countries. The economies are therefore affected directly by the vagaries of monsoon, which has far reaching implications for agricultural productivity and commodity prices. Around 65% of food grain production is undertaken during the monsoon period and approximately 60% of the population in South Asia depends on crop husbandry, animal husbandry, fisheries and forestry for food, income and employment.
Since agriculture is also the basis for industrial development, supplying the raw materials for manufacturing industries and stimulating industrial output, the monsoon can directly affect government savings, public investment and foreign exchange reserves. Agricultural operations have been adversely affected in several parts of the country causing distress to farmers and their families. a deficit of more than 6 million hectares has been reported in paddy, which is the worst affected crop. If we see the overall distribution of rainfall, the northern region has not received adequate rainfall for its kharif sowing. Crops which stand at risk are paddy, pulses, bajra, cotton, soybean and sugarcane. If the overall rainfall in the country remains deficient in the current season, we shall expect the prices of these commodities volatile and may touch higher levels. Scanty early rains would mean a definite drop in the kharif crop and a lower agriculture output. With the consequent rise in prices of agricultural products, a larger proportion of the household income would be devoted to its purchase. This, together with lower disposable income with farmers, would press down industrial demand and hence growth.