It's official: India is in a drought

It's official: India is in a drought
After days of dilly-dallying, the government seems to have finally bitten the bullet. It has now confirmed that India has been indeed drought affected, with the country's northwestern region, known as the bread basket being the worst hit. As per a leading daily that has quoted the Indian Meteorological Department, 31 of the 36 weather divisions have got deficient or scanty rain with the shortfall increasing to 29% from last week's 25%.

To make matters worse, there are indications that monsoons may even withdraw earlier in mid-September instead of early October, thus affecting the Rabi crop as well. Needless to say, a significant damage has already been done to the Kharif crop.

As far as the damage of poor rainfall on the economy is concerned, these seem to be early days yet to make any meaningful estimates. Fortunately, things don't seem as bad as they were during the drought of 2002. For one, we are having a large buffer stock of wheat and rice that may help in curbing runaway prices and secondly, with the government running many pro-poor schemes like the NREGS (National Rural Employment Guarantee Scheme), damage to an average farmer's income could also be minimised. Even some well known economists are not willing to downgrade India's growth just yet. Having said that, the CMIE has reduced its forecast for India's GDP growth from 6.6% to 5.8% for the current year. We second that view and believe that the drought that India is facing will certainly have a negative bearing on economic growth this year.