Global climate models indicate El Niño transitioning to “neutral” in the coming month and developing into La Niña — associated with good rainfall activity in the subcontinent — by July-August.
The Reserve Bank of India’s (RBI) record Rs 2,10,874 crore “surplus” transfer to the Centre has brought down the benchmark 10-year government bond yields to below 7 per cent, for the first time in almost a year. The move has, thus, lowered interest rates even without any cut in the central bank’s policy lending (repo) rate. The latter action is, of course, predicated upon the trajectory of inflation. For the RBI, the primary concern would be food inflation. At 8.7 per cent year-on-year in April, it was way above the 4.8 per cent overall consumer price inflation. Food inflation is interestingly poised, like the national elections, but the uncertainty in its case will extend beyond June 4 and depend on the southwest monsoon. Adequate and well-distributed rainfall during the season (June-September) is something the RBI, and the government taking charge, would desperately want.
To be sure, 2023-24 wasn’t great for agriculture. El Niño’s impact can be seen in pulses. Chana (chickpea) and arhar (pigeon pea) dal are retailing at an average of Rs 85 and Rs 160 per kg, as against their corresponding year-ago prices of Rs 70 and Rs 120 respectively. A poor crop and market rates ruling higher than the official minimum support price have meant that government agencies have hardly procured this time; they had bought over 2.1 million tonnes (mt) of chana alone both in 2023 and 2022. It isn’t just pulses. The all-India modal retail prices of potato, onion and tomato have risen from Rs 20 to Rs 30/kg between last year and now. El Niño resulted in not only subnormal rain, but also high temperatures and delayed onset of winter, affecting all these crops. Even wheat grown in central India wasn’t spared. Proof of that is government procurement: Out of the total 26.3 mt purchased, 19.5 mt or nearly three-fourths has come from Punjab and Haryana. Others, including MP, haven’t contributed much.
Global climate models indicate El Niño transitioning to “neutral” in the coming month and developing into La Niña — associated with good rainfall activity in the subcontinent — by July-August. But the government cannot take chances; nor can the RBI cut rates without a softening of food inflation. The government should allow duty-free imports of all pulses till March 31, 2025. The 40 per cent import duty on wheat, too, must go. The 26.3 mt grain procured this season comes on top of 16-year-low opening stocks of 7.5 mt. While sufficient to meet the public distribution system’s requirement, the country needs more wheat to feed the open market. That gap can only be filled by imports.
