The usually comatose offices at New Delhi's Krishi Bhawan, housing the all-powerful agricultural ministry, are buzzing with a new sense of urgency. Panicky babus can be seen scampering up and down the building's long and dusty corridors, getting into and out of meetings. But it is Room No. 125 on the first floor of Krishi Bhawan-the office of agricultural secretary, Radha Singh-that has virtually become a "war room'', with ministry mandarins flitting in and out with files marked "urgent and important'', and phones ringing off the hook.

In many ways, a battle it is. With rains showing no signs of hitting northern, western and some parts of southern India, the country may be heading into its second year of drought in a span of just three years. And more than anybody else, it is the Congress-led UPA government that should know what a drought could do to its political prospects. This year, confounding all predictions to the contrary, the Congress swept back into power, courtesy India's poor (largely farmers), who, still struggling for a square meal, couldn't see reforms-the plank on which the previous BJP-led NDA government fought the elections-touching their own lives. On July 1, the Prime Minister announced a slew of relief measures in Andhra Pradesh, which included a Rs 60-crore assistance from the Calamity Relief Fund, an additional 1.82 lakh tonnes of foodgrains, a new Seed Act to standardise quality, time-bound help from banks to ensure a steady income for drought-stricken farmers, and the supply of entitlement cards to agricultural families to meet their basic needs.

Agriculture secretary Singh's brief, then, is to ready a contingency plan that can be rolled out once the states revert with details of their requirements. But it is already evident that farmers are running out of time. On July 21, when the Met department came out with its latest forecasts, the country had already witnessed a 12 per cent deficient rainfall (12 per cent less rainfall than the 50-year average). Seven states, including the Vidharbha and Marathwada regions in Maharashtra, Telangana in Andhra Pradesh, Punjab, Haryana, western Uttar Pradesh, Rajasthan and Gujarat have all experienced shortfalls ranging anywhere between 20 and 40 per cent.

But the ministry says that "it is too early to push the panic button; things are not as bad as 2002". According to the ministry's calculation, farm growth is likely to drop only half a percentage point over the projected growth target of 2.3 per cent for this year. Part of Singh's optimism stems from the fact that two more months of monsoon (August and September) still remain. And the other part: "Any shortfall in crop production can be offset by the growth in allied activities like poultry and fisheries," says Singh.

Why The Weatherman Can't Ever Get It Right

Indian Met Dept: Under a cloud Until a few weeks ago, the Indian Meteorological Department (IMD) had predicted even and above average rainfall across India. Now we are told that the monsoon is retreating. Why can't the IMD ever get its predictions right? According to Kapil Sibal, Union Minister of State for Science, Technology and Ocean Development, it's because the IMD doesn't have state-of-the-art equipment. Besides, says B.P. Yadav, Director, IMD, "The origin of the south-west monsoon lies outside the country and hence it is subjected to a host of factors, including El Nino and La Nina. Yadav adds that the IMD constantly reviews the parameters in its weather prediction models. "We reviewed our model in 2000 and dropped four parameters, and in 2003, we built a model on 10 new parameters." But R.K. Pachauri, Chairman, Inter-Governmental Panel on Climate Change, points out that over time, monsoon prediction has become that much more accurate and simpler, thanks to the development of sophisticated models used in many countries. "We can borrow and adapt it to suit Indian conditions," says Pachauri. If the government can't do anything about the rains, it can at least improve predictions to help farmers take corrective action-for example, plant maize instead of water-intensive rice.

Most economists, however, think the ministry is being too sanguine. Says Subir Gokarn, Chief Economist at credit rating agency CRISIL: "In the previous year, agricultural growth moved beyond the trend line, and it will be difficult to repeat that this year. I see no growth in agriculture." Prof Ramesh Chand, Head (Agriculture Department), Institute of Economic Growth, is even more pessimistic: "The growth rate could go down to zero or negative if the rainfall continues to remain deficient till July-end."

Production of coarse cereals-the staple food of many poor families-can really skid this year. Till July 14, jowar, bajra and maize had been sown in only 112.82 lakh hectares compared to 139.82 lakh hectares last year, primarily because of insufficient rains in Andhra Pradesh, Madhya Pradesh and Rajasthan. Similarly, the area under cultivation for pulses and sugarcane, too, has shrunk by around 7 lakh hectares and 7.39 lakh hectares respectively, compared to last year. Fortunately, the early rains have helped to put greater area under rice and cotton cultivation.

What does the contingency plan have by way of response? As a senior ministry official explains, "It will be a kind of survival strategy that will not only include the poor farmers and other vulnerable sections of the society-children and the elderly-but also the livestock population." The emphasis will clearly be on the Food for Work programmes-primarily creating and repairing water bodies (something that was an important focus of P. Chidambaram's new Budget), with the funds being provided from the Calamity Relief Fund (three-fourths will come from the Centre and the rest from the states). While the ministry is still not giving out the exact figures of how much it is willing to spend, indications are that it could be in the range of a few thousand crores, since moving 1 lakh metric tonnes to the drought-hit regions costs Rs 100 crore.

Providing relief to the poor is just one part of the problem. The adverse impact on agricultural productivity can fuel inflation, inflate the fiscal deficit, reduce agricultural exports, harden interest rates, result in lower GDP growth and drastically pull down demand for industrial goods because as much as 40 per cent of the consumer goods are sold in the rural areas. A good example of this is the impact of the poor monsoon of 2002 on various companies. The revenues of tractor companies fell by around 30 per cent, that of fertiliser firms by 4 to 6 per cent, Hero Honda, a two-wheeler major, saw its growth fall by 40 to 14 per cent, and cement companies reported halving of sales to about 7 per cent.

The Monsoon-Industry Linkage

Rural market: Will buyers arrive? Good or bad, the monsoon has an effect on the economy. agricultural production is an immediate natural victim during a bad year, and there are 741 million people in the country who depend on agriculture for income. If farmers don't have a crop to harvest, it means that year they have no money. That ends up hurting all companies that sell products to them-from something as small as a bar of soap to something big and expensive like tractors. A back-of-the-envelope calculation by Ramesh Chand, who heads the agricultural department at the Institute of Economic Growth, reveals that a 1 per cent fall in agricultural growth results in a 0.30 per cent decline in industrial growth. A point conceded by R.L. Ravichandran, VP (Business and Product Development), Bajaj Auto: "If there is actually a drought, then the impact on sales will be felt in the next three-to-six months." For marketers, the only hope is a normal monsoon in the months of August and September, when the second cycle of cropping gets underway.

No wonder then that most marketers are looking at the current situation with a lot of circumspection. Says Salil Kapoor, Head (Marketing), LG Electronics India: "Sentimentally, the effect (drought-like situation) is immediate. The will to buy drops considerably. Instead of spending on durables, people hold back the money for future use." Kapoor should know since as much as 60 to 70 per cent of LG's Rs 4,500 crore in annual revenues comes from rural and semi-urban areas.

According to Ravi Zutshi, Director, Samsung India, a fifth of whose consumer electronics sales comes from the rural and semi-urban areas, the impact will be felt only by Diwali or early next year, since the impact of last year's good monsoon (2003) still continues. For the FMCG sector, the problem of a lower disposable income not only results in a reduction in the overall expenditure, but also to downgrading-moving to items at lower price points. Explains Ashish Jain, Manager, ICRA: "Even in a drought-like situation, the markets may not shrink in terms of volumes, but there is a definite shrinkage in value terms.''

Of course, a 15 per cent shortfall by July 21, 2004, is really nothing compared to the 49 per cent shortfall witnessed in July 2002-the worst in the nation's 100-year history. And for those who are more statistically minded, only 17 of the 36 meteorological divisions have reported deficient rainfall, while in 2002 the number was around 22.

The bottomline: If rains do come in August and September, most farmers should still be able to salvage what's left of their sowing season. Even if the rains fail, the GDP may still grow at around 6 per cent, thanks to the robust growth in services and manufacturing. But for millions of poor farmers, life will get a whole lot tougher. And so will it for the UPA government, whose stated goal is to give the farmers "a new deal".