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Rediff.com  » Business » Poor monsoon may dampen UPA's food security plan: Citi

Poor monsoon may dampen UPA's food security plan: Citi

June 22, 2009 17:17 IST

Falling water reservoir levels coupled with poor monsoon will not only impact India's economic growth adversely but United Progressive Alliance's ambitious plan to guarantee food security to poor families will also be hit, global financial major Citi said.

While news on the monsoon front remains bleak (rainfall during June 1 to 17 was 45 per cent below normal), water levels in reservoirs across the country are dwindling, Citi economist Rohini Malkani said on Monday.

"This has implications not only for GDP and inflation but also on the proposed Food Security Act (i.e. providing 25 kg of wheat or rice per month at Rs 3 to every family below the poverty line)," Malkani said.

Earlier this month, Citi revised its FY'10 GDP forecast for India to 6.8 per cent from 5.5 per cent and it raised its view to 7.8 per cent from 6.6 per cent for FY'11 on the back of election results and higher investment growth.

"While reservoir levels are typically lower at the onset of the monsoon, they are lower this year even in comparison to the past due to average rainfall last year and the absence of pre-monsoon showers this year," she said.

Water stock in 81 key reservoirs across the country that account for 72 per cent of India's total reservoir stock indicate that the current storage is just 10 per cent of full reservoir capacity and 20 per cent of last year's storage.

Further delay in the monsoons could result in states reducing the supply of water for irrigation and conserving it for drinking purposes instead, as the individual states manage the water levels in their respective reservoirs.

"Thus while 58 per cent of India's net sown area is dependent on the monsoons, dwindling water reservoir levels could impact even the balance 42 per cent of the area not dependent on the monsoons," Malkani said.

Over the last month, incremental news on the agricultural front mainly rising El Nino threat, Cyclone Aila, and water reservoir levels have been worrying in the backdrop of delayed and weakened monsoon, she said.

An El Nino event is the warming of the ocean surface off the western coast of South America that occurs every 4 to 12 years creating unusual weather patterns globally, including possible suppression of the Indian monsoon.

However, she said even as plunging reservoir levels could exacerbate monsoon woes leaving little cushion for comfort, the build-up in stocks of rice and wheat does provide cushion and would help avert an outright food crisis.

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