Arun Jaitley downplays monsoon fears; says govt has enough food stocks

New Delhi: Finance Minister Arun Jaitley today sought to allay fears over predictions of deficient monsoon saying conclusions on that basis either on inflation or some kind of distress situation are “far-fetched”.

He also said in the last 48 hours, ever since the IMD predicted deficient monsoon this year, the conclusions were being drawn up in an exaggerated manner and it was necessary to place the finance ministry's view on the subject.

Dismissing the slide in the stock markets in last three days as not a trend, the Minister said revenue, especially indirect tax collections - a key indicator, has shown an impressive jump.

Jaitley expressed confidence that foodgrain production will not be impacted significantly by the prediction of below-normal rainfall in north-western region as the area is well-irrigated while monsoon will be normal in all other parts of the country.

Also, the country had enough foodgrain stocks to meet any contingency, he said.

“The kind of speculation that we have been seeing and speculative analysis that we have been reading about appears to be somewhat misplaced. What is extremely relevant is obviously has significant impact on Indian economy,” he told reporters here.

Jaitley said what was relevant was the geographical distribution of monsoon and the timing of rainfall. “These are almost as significant if not more than the extant of rainfall.  And this an area by which the impact is more significant than the sheer volume itself”.

The IMD on Tuesday predicted that rainfall was likely to be only 88 per cent of the long-term average and the Reserve Bank of India suggested the government to draw contingency plans to deal with the impact of poor monsoon on prices.  The BSE Sensex has fallen by 1,035.57 points in last three trading sessions on fears of drought.

In the wake of predictions about the monsoon by the IMD, Jaitley called a meeting of senior meteorological scientists yesterday and had a detailed analysis of the prediction and estimates with them.

“Their advance predictions appear to be suggesting that we will be somewhat closer to the normal in South, Central and North East zones. The slight inadequacy, if at all, is in the North-West and a large part of North-West has substantial irrigation facility also.

“Assuming that the advance predictions are correct, on account of geographical distribution the impact on foodgrain production may not be very significant,” he said.

The Minister recalled that there was a similar monsoon pattern last year. The advance predictions this year are somewhat better than last year's. “In any case there is abundance of food grain available and therefore, the kind of food management that we saw last year prevented any form of inflationary trend in the food management itself.”

Jaitley said so for anybody to draw conclusion on that basis of either inflation or some kind of distress situation is far-fetched.

“I don't anticipate any situation of this kind even with the kind of prediction which have been made,” he said.

This, he said, is also supplemented by a few other trends which are available. The recent growth figures which were given were itself giving a positive indication. The quantum of public expenditure has increased and you likely to see far bigger increase in next few months.

He said revenue, particularly indirect tax revenue, which is one of the key indicators, is showing an impressive jump.

“In the last few months and I have been getting data also bank wise, many stalled projects have started, some still need to be pushed up.

“There is a downward movement in bank NPAs and therefore, coupled with these trends I foresee the recovery trend in the economy continuing,” he said.

The Minister further said that the food management was the responsibility of the government and the buffer stocks would be used to calm down prices.

“Food management is responsibility of the government and last year's rainfall was much lower than this year's prediction and rainfall happened with lag. But we did not allow prices to go up because we have huge buffer of food grains. And therefore, the government has this tool available,” Jaitley added.

The Minister further said that the situation in the current year was likely to be better than what it was in the previous fiscal.

“As far as inflationary trends are concerned by and large on account of food management and the extent of food stocks we have, we have kept it under control,” he said, adding there could be some impact on prices of certain commodities because of seasonal factors.

Last year the government managed to contain the prices of onions and tomatoes, he said, adding currently the steps were being taken to deal with shortage of pulses.

“At the moment there has been some impact (of seasonal factors) as far as pulses are concerned. This could happen on account of various factors. Department of Food in the last few weeks has been holding measures to increase the supply as far market is concerned so that sudden spurt in prices of pulses could be contained,” he said.

Inflation in pulses stood at 15.38 per cent in April, up from 13.22 per cent in March. The rate of price rise in Pulses has been in double digit for four consecutive months.

The government, Jaitley said, was going to take a decision on raising the minimum support price of farm products.  “The process of consultation is going on. Soon it will go to the Cabinet,” he said.

On the recent dip in the stock markets, Jaitley said that there was no basis to justify that it was a trend.  “A day or two reaction in the market itself never indicates a trend ... I don't read too much on daily movements as far as markets are concerned.

“...By and large with the health of economy recovering, I see much greater stability as far as markets are concerned.  And therefore, the disinvestment programme of the government will continue as it has been planned,” he added.  The government proposes to raise Rs 69,500 crore from disinvestment in the current financial year.

On fund allocation to MNREGA, Jaitley said that an additional Rs 5,000 crore would be provided for the scheme as there had been no significant increase in rural wages.

“I have in the budget indicated that over and above Rs 34,000 crore, which is allocated to MNREGA, I am this year in all likelihood going to provide an extra Rs 5,000 crore...in the last one or two years there has not been a significant increase in rural wages and therefore, we needed to improve the quantum as far as rural wages are concerned,” he added.