Budget 2023: Under the shadow of?El Ni?o

As we approach Budget 2023, business’, scribes are scripting wish lists, targets and expectations. There is a worry about limiting fiscal deficits to 3 %. The Economic Survey forecasts a baseline gross domestic product, or GDP, growth of 6.5 per cent in real terms in fiscal 2024. There is the worry of stagnant stock markets, a hike in interest rates by the fed to stem inflation and the ongoing Ukraine war.

As punting on stocks and policy initiatives reach a fever pitch, a small voice in my head says El Ni?o. We need to start thinking about the evolving El Ni?o?in the Pacific, Just to explain, El Ni?o?is a phenomenon, when the waters in the Pacific go beyond the threshold of 24.5°?Celsius, precipitation shifts to the Pacific and the south-west Monsoon weakens resulting in below par power rainfall in the subcontinent. Global models since December have consistently been projecting an evolving El Ni?o?in the Pacific.

Effectively, statistics for the past 50 years suggest there is a 0% chance of excess, an 80% chance of below normal and?a 60% chance of drought in an evolving El Ni?o?year.?There is only a 20% chance of normal.?If you think I am a prophet of doom.?and you can look at all the preceding years since 2000, 02,?04, 09, 12, 14, 15, and 19 (these are all El Ni?o?years). Only 2019 had good rainfall on account of a very powerful Indian Ocean Dipole (this was a one-in-20-year event).?In my experience, evolving El Ni?o?like 2023 is more dangerous than an already evolved one.

Not to say that such foreshadowing can be incorrect. And there is a chance of that happening it, as it occurred in 2019. 2019 is a good Monsoon. But in terms of probabilities, it's very low.?In terms of climate, we have to work with probabilities.?The other year similar to 2019 is 1997 (a year with a monster El Ni?o?that resulted in good rainfall over the sub-continent).

El Ni?o?has a direct impact on the Indian economy. In a drought, India loses up to 1% of its GDP.?India is a drought-resilient country.?But we are not a drought-proof country.

On average in an excess monsoon year (10% more than the 88cm long-period average of the Monsoon rainfall for the months of June, July, August, and September), food production jumps by 15%; in a normal year, it grows by about 4.4% and, in a drought year falls by 7%. Food production as a measure of the monsoon’s impact is skewed because it does not consider the cost of energy used to produce that food. The monsoon affects both the demand and the supply side of energy.?

Governments and the Indian economy have been dealing with deficit rainfall and droughts for?100 years and there are now tools as well as policy initiatives that can be put into place to deal with any such eventuality if that?might occur in monsoon 2023.

But what really runs contrary to the capacity to deal with this kind of a climate crisis is denial. The standards to declare deficit or droughts werdeficits clear until a few years ago. Anything below 90% was a drought 90 to 95% below normal 96% to 104% normal, 105 to 110% above normal and anything above 110% was excess.?These standards have now been diluted. The IMD has abolished the term drought and they use the term deficit. The declaration of drought is now complex. There are three kinds of droughts, meteorological, hydrological and agricultural. Also, the declaration of drought in a village, district, cluster or state depends on a definition according to the NDMA manual. And it has an implication on the amount of NDRF funds that would be released. The previous standard, strictly speaking, was purely meteorological, but it created a nudge or an acceptance that there was water stress due to deficient rainfall in any given area. The lack of leadership on that subject creates an environment of denial and doubt.

But in agriculture, everyone in the rural value chain, especially in rain-fed?areas gets hit very hard. There are districts in Maharashtra, Karnataka and Andhra and Telangana that are drought-prone. Also one another problem that happens in deficit?rainfall events is that the temporal distribution of rainfall becomes even more skewed.?You could be dealing with droughts and inundation in the same geography in a matter of weeks.

We have climate models that have become more reliable.?We should use this opportunity to put in more resources?to accelerate watershed activities before the Monsoon.?And truly weaponize Pradhan Mantri Fasal Bima Yojna (PMFBY) by using technology (weather and satellite data) to establish a lack of soil moisture, drop in vegetative indices and?procure weather data so that payouts could be done fairly quickly and that data can also be used for payments in?NDRF.

Always err on the side of caution.