El Nino may impact India's GDP by 1.75%: Assocham

About five per cent deficit rains due to possible El Nino factor could have a bearing on economic growth by 1.75 per cent in the 2014-15 fiscal, affecting lakhs of unskilled jobs, an Assocham report said.      

Deficiency in rains could also impact food inflation, which has always been a concern to policy makers, it said.

"The deficit rainfall of 5 per cent due to El Nino factor will cause loss to the GDP of about 1.75 per cent, i.e. Rs 1,80,000 crore (Rs 1800 billion), hurting lakhs jobs of unskilled sectors," the report said.

About 60 per cent of net sown area of the country is rain-fed. With every one per cent deficit in rains, the country's gross domestic produce (GDP) falls by 0.35 per cent.

So, a good agricultural performance is a must for India to raise demand for services and industrial products, it said. 

A rise in farm sector is estimated to raise demand for industrial goods and services, it added.

The study mentioned that about 30 per cent of the manufacturing sector is agriculture-based and a bumper crop ensures the supply of raw material for industry at relatively lower prices.

Highlighting the 12-point strategy submitted to the government to contain the drought-like situation, Assocham said the government must expand the farm insurance cover and advise financial institutions to settle crop insurance claims in drought-hit areas without delay. 

It recommended that high quality seeds of alternate crops should be distributed among farmers in the drought-affected areas.

The minimum support price (MSP) of alternative crops to be cultivated in drought-hit areas should be kept attractive.

The government should realistically assess the situation in order to estimate the shortfall of oilseeds and pulses and help the traders with market intelligence, the report said.

It also suggested the government to bring down the cereal inflation by liquidating the extra stock that the government is keeping over and above the buffer requirements.

Assocham also recommended scrapping of the APMC Act, free flow of agriculture goods across states to bridge demand-supply gap, prevent hoarding, create relief employment programmes, prepare alternative cropping plan and fuel subsidy to farmers to protect standing crops.    

India is expected to see below normal monsoon this year with Met department forecasting 95 per cent rainfall because of the El-Nino effect, which is generally associated with the warming of ocean water.