DROUGHT - A BIGGER ISSUE THAN TEAM ANNA OR ECB OR US FED

By Ruma Dubey

When you watch the TV or read the newspapers – did you anywhere, even remotely get the feeling that India, which is primarily an agrarian country, is staring hard into the face of a drought? Do we  know the impact of the word ‘drought’?

The media is busy covering news about Team Anna and the probability of them forming a fourth front, a new political party. Good. We need a new political party. Or else we have news flashing on about the Indian Olympic (non)achievements. Or the ECB and the Fed Meet.  There are mindless debates on TV, which is more of a cacophony on these multitudes of topics. But did we come across anywhere, any debate on why the IMD keeps on failing on its monsoon predictions so miserably? Or how does India deal with a drought?

So is the media, which we see on TV or read in the newspapers more urban, giving us a picture which is not the real India? Because how can Team Anna, Olympics, the ECB and US Fed be bigger issues than drought in a country where over 60% of the population is directly or indirectly dependent on agriculture?  Or do we talk about drought only when food becomes costly for us urbanites or when taps start running dry? Why are our priorities so misplaced? The market is down but not overtly perturbed about the impending drought. Does that mean that we as a nation can today deal with drought more efficiently, have we got all the disaster management plans in place? Certainly not. Remember, we tend to dig the well only when the house is on fire.  Or are we so inundated with bad news all around that we just do not want talk about it, believing that if we do not talk about it, it will get resolved on its own?

Drought is a national calamity. We simply cannot afford it; as such we are grappling with inflation and a drought means food prices will only go up further. Apart from a fall in production, especially pulses and rice, which will as such give vent to further rise in costs, wholesalers and retailers will hoard, artificially jacking up the prices further. It is indeed good that Subbarao did not give in to public pressure and bring down rates as inflation will remain the biggest headache in the months to come.  Growth? When there is a drought, it will as such take a further hit.

Apart from India, even USA is facing a drought. Official figures put out by USA shows that as of July 31, 38.12% of the country was in severe drought or worse, compared with 38.11% a week earlier. Drought is also hurting Canada's corn and soybean crops, while heat waves across Europe are also destroying cash crops. It is always reassuring to know that we are alone, others are also suffering with us.

And did you know that there is a direct connection between rising food prices and gold? A report in the Wall Street highlights how gold is poised to get a boost from surging corn and soybean prices, as investors look to the metal as a hedge against the growing risk of global inflation. Gold, in times of volatile markets and prices, tends to become the best hedge.

In India, drought spells bad news for PSU banks as crop failure increases chances of defaults. With most of the banks having a significant of their portfolio in agri loans, if most states declare a drought, we could see large scale rescheduling of repayment of crop loans. NBFCs providing loans to farmers will also be hard hit. And power shortages, especially in areas which generate power through hydro, with water levels falling, could face a nightmare. Of the total installed capacity of 205,340 MW of power in the country, 19.1% is hydroelectric. As per data from the Govt, water level in 84 important reservoirs nationwide is at about 55% of last year's storage levels and 76% of the 10-year average. Authorities at Bhakra Nangal Dam in Punjab have reduced water supply from the reservoirs by 10% to conserve water for coming months and this has already reduced the hydro generation by 12% on a YoY.

The intent of this article is to make one aware of the reality of India today, the ground truth. Drought is the biggest issue facing us today and not the circus which the television is beaming.

PS: India will be importing pulses and foodgrains; will we soon be importing water also?