Drought may squeeze GDP growth to just 5.4 per cent: study

The drought in the country this year will lead to a 15-20 per cent decline in kharif crop over last year. The shortfall in foodgrain output would be more than 16 million tonnes, and could lower India's GDP to below 6 per cent, a study by the the Federation of Indian Chambers of Commerce and Industry (FICCI) says.

The research paper suggests a four-pronged strategy to make the agricultural economy less dependent on monsoons - bringing more area under irrigation, setting up an advanced weather forecasting system, enhancing research and development, and farm mechanisation.

The paper stated that in Punjab and Haryana, 20-30 per cent of cultivated area has been shifted to late-sown basmati rice, a luxury variety cannot be procured for the Public Distribution System. This in turn will affect the rice available for the central pool.

India's rice output is expected to fall sharply to 82 million tonnes in the 2009-10 against the early forecast of 88 mt. This is 17 mt below the record production of 99.2 mt in 2008-09. However, acreage of cotton and pulses is expected to increase marginally.

Moreover, given the low water levels in the reservoirs, the rabi or winter crop output is also likely to be affected by about 5 per cent. The water stored in 81 of India's biggest reservoirs is 57 per cent below the 'live capacity', which is less than the last 10-year average of 64 per cent, FICCI said. Last year it was 69 per cent.

The government had earlier said that wheat production in 2009-10 would be 79 mt, marginally lower than the record production of 80.58 mt. Wheat constitutes 72 per cent of India's foodgrain output.

Rains have been 20 per cent below normal this summer, the worst in 37 years, leading to drought in 44 per cent of India's 626 districts. Coupled with late-monsoon floods in Andhra Pradesh and Karnataka, this could mean a GDP growth of 5.2-5.8 per cent against the 6.4 per cent predicted by the government; while agricultural GDP could go negative at minus 2-4 per cent.

FICCI has suggested that bringing more farming area under irrigation is the only long-term solution that can result in 'monsoon-proofing'. Since the grandiose project to inter-link the country's rivers Ganga and Cauvery would require a large amount of money and time, it would therefore be prudent to develop small sections on the river-linking system, the FICCI argued.