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, likeDonald 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.
- 1The government's strategic shift from a 'just-in-time' to a 'just-in-case' model highlights a key governance principle of building national resilience. This policy involves maintaining substantial food grain buffer stocks, managed by agencies like the Food Corporation of India, and strategic petroleum reserves to safeguard against external shocks like adverse weather or geopolitical conflicts, ensuring national stability and welfare.
- 2The 'just-in-case' strategy, while crucial for national security, has significant economic and social implications. Maintaining large food and petroleum reserves incurs substantial costs funded by taxpayers, impacting the national budget. However, these reserves act as a vital social safety net, as seen with the distribution of free foodgrains during the COVID-19 pandemic, ensuring food security for vulnerable populations.
- 3India's policy of building massive food, forex, and strategic petroleum reserves is a direct diplomatic response to global geopolitical instability. These reserves act as a buffer against international shocks, such as energy crises from West Asian conflicts or trade disruptions from tariff actions. This enhances India's self-reliance and strengthens its position in international negotiations by reducing vulnerability to external pressures.
- 4The India Meteorological Department's (IMD) forecast of a 'below-normal' monsoon, attributed to the high probability of El Niño conditions, underscores the growing impact of climate phenomena on national planning. This scientific prediction necessitates proactive measures like maintaining buffer stocks to mitigate the effects of potential droughts, highlighting the critical link between climate science, environmental challenges, and national food security policies.