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India: Government takes measures to prepare for drought

India's economy is less dependent on the monsoon than ever, but failed rains will add to the government's inflation woes.

India set aside 900 megawatts of power and ensured a stockpile of diesel fuel will be available for farmers in its breadbasket states to pump up groundwater for irrigation, as the country's metereological department downgraded its outlook for the summer monsoon.

 According to India's Hindustan Times newspaper, the metereological department lowered its forecast for the monsoon to 92 percent of normal rainfall levels from an earlier estimate of 96 percent. If rainfall drops to 90 percent of normal, India experiences drought conditions.

"Declaring a drought — if at all — depends on the extent to which farms are affected," the paper quoted Sailesh Nayak, the earth sciences secretary, as saying. According to meteorological classification, a more than 10% rain deficit in nearly 20-30% of the country qualifies as drought, the paper said.

A patchy monsoon could crimp food output and hit farm income, which supports a third of Indians, the HT said. It would also cause a spike in food prices, contributing to inflation that's already running around 10 percent.

On the other hand, the impact of the monsoon on India's economic growth will not be as dramatic as in year's past, writes Business Today.

"In any given year, about 16 percent of India's total area is droughtprone, impacting some 50 million people," the magazine's Sanjiv Shankaran and Anand J. reported. "But with agriculture making up only 15 per cent of the gross domestic product (GDP), compared with 55 per cent five decades ago, monsoon's impact on the economy is now limited."

One reason is a vast increase in the use of irrigation since the early days of the green revolution, which prompts Yoginder K. Alagh, former member of the Planning Commission, to say that deficient rainfall in June can have an impact of "not more than a quarter or half a per cent of growth in agricultural output".

Inflation may be a bigger worry.

"In 2012, food prices have seen a relentless increase," Business Today reports. "Food inflation, as measured by the wholesale price index (WPI), was 10.74 per cent in May, compared with a negative 0.68 per cent in January. Deficient rainfall in June may put pressure on prices and is bound to make macroeconomic management tougher and squeeze household budgets."

That means not only the hungry will need to tighten their belts.
 

http://www.globalpost.com/dispatches/globalpost-blogs/india/india-government-drought-inflation