Ahead of ‘below-normal’ monsoon, build resilience and account for costs

The India Meteorological Department has forecast a “below normal” southwest monsoon, with the country expected to receive only 92 per cent of the long period average rainfall for the four-month season (June-September). The prognosis — based on the high probability of El Niño conditions emerging by the second half of the season — comes on top of the energy supply shock from the conflict in West Asia. However, the consolation here is the ample stocks of wheat and rice in government godowns. At 60.4 million tonnes (mt) on April 1, these are above the 50 mt a year ago and the minimum required buffer of 21 mt for this date. With a bumper wheat crop, whose harvesting and procurement has just begun, the stocks are likely to rise, cushioning the impact of any monsoon failure.

Food stocks do what foreign exchange reserves are meant for — act as a shield against external shocks. Such shocks could be due to weather (losses from drought or excess rain), pandemics (free foodgrains were the most effective social safety net during Covid), global financial meltdowns and wars (both geoeconomic, like Donald Trump’s tariff actions, and actual ones like in Iran and Ukraine). India, in recent times, has built not only massive food and forex chests, but even strategic petroleum reserve capacity of some 5.3 mt. Together, they point to greater reliance on “just-in-case” as against the conventional “just-in-time” strategy. The latter focused on efficiency, minimising waste by producing goods only when needed and stocking just enough to align with current supply-demand dynamics. With just-in-case, governments and firms prioritise long-term resilience over short-term efficiency to withstand unexpected supply chain disruptions.

Building resilience, whether grain warehouses or underground crude oil caverns , costs money. That includes fixed capital costs as well as inventory holding and other operational charges. Stored goods, notably grains, are also prone to quality and value loss over time. There is a cost even to maintaining forex reserves that are typically invested in low-yielding safe assets. While challenges from climate change and geopolitical instabilities make resilience-building necessary, the key is to recognise the costs involved. While firms may pass on the additional costs to consumers, a significant part of national resilience budgets would have to be funded using taxpayer money. All the more reason why that money ought to be well spent and fully accounted for.