Economy
Rain check: Monsoon deficit shock continues for third year
The weak south-west monsoon this time is particularly worrying for the economy, especially the farm sector, because it is the third shock after deficient rains in June-September 2014 and the unseasonal downpour in March 2015, says ratings agency CRISIL
 
For the second year in a row, India has had a deficient monsoon. In June, the Indian Meteorological Department (IMD) had forecast 12% shortfall in rains, and the actual deficit turned out to be 14%. The weak south-west monsoon this time is particularly worrying for the economy, especially the farm sector, because it is the third straight shock after deficient rains in June-September 2014 and the unseasonal downpour in March 2015, says a research report.
 
According to ratings agency CRISIL, at an all-India level, rainfall deficiency peaked to 16% in mid-September but improved slightly in the last two weeks. "Although this is no good news for kharif crops - rains in July and August are most crucial - there might be some respite for the rabi crop as reservoir storage levels have stabilised. However, the improvement in rains was not enough to bring relief in severely deficient states. The situation is most precarious in Maharashtra and Karnataka, where reservoir levels as of 1 October 2015, were 43% below normal. That does not augur well for rabi crops in these states," it said.
 
For the second year in a row, India has had a deficient monsoon. In June, the Indian Meteorological Department (IMD) had forecast 12% shortfall in rains, and the actual deficit turned out to be 14%. The weak south-west monsoon this time is particularly worrying for the economy, especially the farm sector, because it is the third straight shock after deficient rains in June-September 2014 and the unseasonal downpour in March 2015.
 
Rainfall deficiency was most acute in the north-west region at 17%, followed by central at 16%, south peninsula at 15% and east and north-east at 8%. In the north-west and east and north-east, rainfall deficiency was lower compared with last year. But for central India and the south peninsula, the deficiency this time is higher, the ratings agency said.
 
CRISIL said, this time, five states have seen a rainfall deficiency of 20% or more. At 45.8%, Uttar Pradesh (UP) had the highest deficiency, which is nearly as bad as last year’s 47.2%. In Haryana, the deficit was 36.7%, in Punjab 31.7%, in Maharashtra 25.2% and in Karnataka 19.9%. While irrigation cover is high at about 77-99% in UP, Haryana and Punjab, it is low at around 18- 34% in Maharashtra and Karnataka. The impact of deficient rains, therefore, differs by geography, it added. 
 
CRISIL’s DRIP (Deficient Rainfall Impact Parameter) captures the interaction between vulnerability (low irrigation) and weather shocks (rainfall deficiency). DRIP scores are naturally high for Maharashtra and Karnataka. UP, too, features here despite its healthy irrigation cover. That’s because its eastern part has been under a prolonged dry spell with acute rainfall deficiency since the last week of July. 
 
The longest dry spell this season was in the Marathwada region of Maharashtra. Despite abundant rains in June, which supported sowing, a prolonged dry spell that began in early July increased rainfall deficiency in this region to 54%. This is believed to have damaged sown crops such as pulses, soybean, and cotton. 
 
For UP and Maharashtra, CRISIL said, it was a double-whammy with two consecutive years of sub-par rains. Last year the high rainfall deficiency in these led to highest DRIP scores. Together, Maharashtra, UP and Karnataka account for close to 30% of India’s kharif foodgrain production.
 
Kharif sowing picked up in July because of abundant rains in June. However, as rains receded by July-end, sowing slowed and lagged long-term trends, even though it was better than last year. 
Overall kharif sowing this year is 1.3% higher than 2014, but 2% below the long-term trend. The crops that have suffered the most are jute and mesta. Foodgrains sowing is 2.7% more than 2014, but 3.5% below long-term trend.
 
While overall sowing of pulses is more than last year, that’s not the case for crucial crops such as tur (arhar) because of dry spells in Maharashtra, Uttar Pradesh and Karnataka, which are the key growing areas, CRISIL said.
 
The Ministry of Agriculture recently released its first advance estimates of kharif production for fiscal 2016. Overall kharif foodgrain production is seen 0.2% lower than the second advance estimate of last year, with categories such as tur, maize and ragi showing lower production levels.
 
Which crops and states have been impacted?
 
CRISIL’s DRIP scores indicate that overall foodgrain scores are higher than those recorded in 2012 (when rains were delayed and deficient) and in 2014. The most affected crops are tur (arhar), jowar and soybean.
 
Similarly, at the state-level, in two of the three states with highest DRIP scores – Maharashtra and Karnataka – DRIP scores this year are higher than in 2012 and 2014.
 
Why is overall food inflation low?
 
CRISL said, despite the negative impact of inadequate rains, food inflation has remained low. Between April and August, food inflation (measured by consumer food price index) has averaged 3.9%, down from 8.6% in the corresponding period of last fiscal. The sharpest fall was unmistakably in fruits and vegetables, where a high-base effect (sharp price spikes in 2014) offered relief. 
 
"But even leaving this out, food inflation is sharply down. That is because inflation in cereals, eggs and milk categories has plunged nearly 400-560 basis points (bps). The only category where inflation this year is higher is pulses and onions. In pulses, production has suffered due to lower output in 2014, damages due to unseasonal rains in March 2015 and shortfall in sowing (especially tur) this year. As a result, inflation in pulses stands at an average 20% this year so far, with August inflation crossing 25% for the category, and surging to 42% for tur. Long dry spells have hurt onion output, too, causing its inflation rate to spiral to 51.7% in August," the ratings agency added.
 
According to CRISIL, there are three reasons for this year's decline in food inflation, proactive food management by the government, restricted hikes in minimum support prices (MSP) and role of international prices. 
 
Like last year, the government has continued to curb spikes in the prices of certain commodities by clamping down on hoarding (extending the ban on onion hoarding by one more year) and allowing imports of pulses, prices of which are lower abroad. 
 
Lower hikes in MSP in recent years have also significantly contributed to low inflation in foodgrains. For both paddy and wheat, MSP hikes this year were less than 4% -- well below the 8-9% average seen in the last decade. Lower MSP hikes keep overall farm prices subdued as it often acts as a benchmark for traders in the open market. 
 
A sharp fall in global prices of agri-commodities following a supply glut has kept domestic food prices low. This is especially true of commodities such as oilseeds where global prices have fallen nearly 20% so far, and, where import dependence is almost 62%. Similar is the case of cereals where global prices are almost 17% lower compared with 2014 and where import dependence is 27%. For commodities that are exported, low global prices have meant higher domestic supplies, which have helped keep prices low. An example of this is sugar, where global prices have fallen by about 29% so far.
 
In addition, restrictive fiscal policy also helped in keeping demand under check, CRISIL said.
 
What does it mean for GDP growth?
 
CRISIL said, in fiscal 2016, it expect GDP growth to be marginally higher at 7.4% compared with 7.3% in fiscal 2015. While industry is expected to grow 50 bps faster than last year at 6.6%, services growth is seen 40 bps lower at 9.8%.
 
"Agriculture and allied sector growth is expected below trend for the second year in a row. In fiscal 2016, we expect growth in this sector at 1.5%. Agriculture GDP comprises crops (foodgrains and horticulture), livestock, forestry and logging, fishing and aquaculture. Past data show that growth in livestock, fishing and aquaculture categories has remained healthy at 5% to 5.5% even in years of weak monsoon. These two sectors comprise nearly 27% of the agriculture and allied sector GDP, and their growth rates could hold up this year too."
 
"Foodgrains production this year could however be lower as suggested by advance estimates released by the Ministry of Agriculture. But the rest of the agriculture and allied category will provide cushion. And finally, a low base – last year agriculture GDP growth was 0.2% - will provide a lift," the ratings agency said.
 
Rural demand falling
 
Almost half of India’s GDP comes from rural areas. About 40% of India’s households engage in agriculture and within this group, two-thirds are heavily reliant on it. The impact of a monsoon shock is accentuated due to high vulnerability of the farm sector stemming from disproportionately high dependence on agriculture income, high agricultural indebtedness and farmer suicides, low irrigation buffer and poor crop insurance cover. 
 
The ratings agency said, as agriculture suffers, the biggest impact will be on rural demand, which has already slowed in the past few years. "This is especially true for automobile sales. Sales plunged sharply in fiscal 2015 in segments with high rural focus, and the trend has continued or even amplified this year too, in certain segments. In tractors, a second year of weak rainfall has caused sales to fall nearly 16% so far in the current fiscal. In fiscal 2015, sales had dipped 13%," it added.
According to CRISIL, due to falling wage growth, the rural incomes are already dented. "Add three consecutive monsoon shocks and what you get is significant erosion in farm income. Another factor that has hurt is falling export prices of agriculture commodities. India exports 11% of rice and 3% of wheat production. Their global prices have fallen by nearly 17% compared with last year. In addition, slower growth in rural wages has hit small cultivators, who supplement their income with off-farm wages -- more so if they are marginal farmers (owning less than a hectare of land). The sharp slide in rural wages has meant off-farm income growth is also moderating. Farm incomes have over time suffered due to falling productivity of agriculture, un-favourable input costs and output price dynamics," it said.
 
Will El Nino continue to affect Monsoon in 2016?
 
In 2014 and 2015, the El Niño effect - a climatic condition, which warms equatorial Pacific waters – created havoc. The condition weakens the Asian monsoon, often causing drought in north-west and central India and heavy rainfall (or even floods) in north-east. In the last decade, El Niño was one of the factors responsible for two of India’s most severe monsoon failures (2002 and 2009).
 
CRISIL said, as per early information available, El Niño is predicted to continue in early 2016 as well. The National Oceanic and Atmospheric Administration (NOAA) attaches a 95% chance of El Niño continuing into the Northern Hemispheric winter in 2015 (December to February) and a 55% chance that it will gradually weaken in late spring 2016 (March, April and May). However, the impact on Indian monsoon in 2016 will depend on the strength of its occurrence, it added. 
 
How DRIP works
 
The DRIP index, which is a product of the percentage rainfall deviation and unirrigated area, captures both the magnitude of the shock (rainfall deficiency) and the vulnerability of a region (percentage of unirrigated area). Higher the DRIP score, greater the impact of rainfall deficiency; the impact more pronounced for unirrigated crops and regions/states. 
 

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Climate change behind mysterious kidney disease: Study
A mysterious kidney disease that has killed over 20,000 people in Central America since 2002, and now spreading to other countries including India, may be caused by chronic, severe dehydration linked to global climate change, says a new study.
 
"This could be the first epidemic directly caused by global warming," said one of the researchers Richard Johnson, professor of medicine at the University of Colorado School of Medicine in the US.
 
So far, the manual labourers on sugar cane plantations in the hotter, lower altitudes of Central America's Pacific coast have been hit hardest by the disease. It has also been reported among farmworkers, miners, fishermen and construction and transportation workers in the region.
 
"Some districts of Nicaragua have been called the `land of widows' due to the high mortality rates occurring among the male workers from chronic kidney disease," Johnson pointed out.
 
The epidemic was first described in 2002 and has been dubbed Mesoamerican Nephropathy.
 
Theories abound about what may be causing it, including exposure to heavy metals, pesticides and other toxic chemicals. But Johnson believes the actual culprit is chronic recurrent dehydration.
 
His research team studied sugar cane workers in Nicaragua and El Salvador. They found that the labourers routinely worked in conditions exceeding the recommended heat standards of the US Occupational Safety and Health Administration (OSHA). 
 
And even though some of them drank up to one to two litres per hour, the researchers found they still suffered serious dehydration on a daily basis.
 
One of the major side-effects of this dehydration was hyperuricemia or excess uric acid levels in the blood. 
 
In one study, sugar cane workers in El Salvador had uric acid levels of 6.6 mg per decilitre in the morning which increased to 7.2 mg in the afternoon. 
 
And 21 of 23 people with chronic kidney disease (CKD) had hyperuricemia.
 
Dehydration also activates a pathway in the kidney which generates fructose that, when metabolised, produces uric acid. 
 
Johnson's team also found that these dehydrated workers had high concentrations of uric acid crystals in their urine. 
 
The uric acid crystals are thought to trigger tubular damage and fibrosis in the kidneys.
 
The study suggests that this epidemic may be gaining momentum now because global warming is increasing the risk of dehydration.
 
Johnson said that this kind of CKD is now being observed in Sri Lanka, India, Thailand, and Egypt.
 
He recommends improving work conditions and hydration practices among those most at risk for developing the disease.
 
The study was published in the the American Journal of Kidney Diseases.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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