Given this prospect it is surprising that the policy initiatives announced by the government recently seem to focus only on the farmer. To start with, resources from the Calamity Relief Fund, which was created at the instance of the Eleventh Finance Commission and has at its disposal Rs. 11,000 crore over a five-year period, are to be used for financing relief work. But the nature of such relief work has not been defined. Further, the fact that in a statement to the press the Minister for Agriculture has said that these resources are going to be made available to all farmers in drought hit districts and not just small and marginal farmers is revealing. It fails to mention the agricultural worker whose plight is likely to be severely affected.
 
Most of the other proposed measures are directly aimed at farmers. Nabard is to be instructed to defer recovery of interest on crop loans, and there is a small probability that interest dues may be waived altogether. Guidelines are to be issued to sugar mills to pay out arrears due to cane growers. And deferred payment of insurance premia under the National Agricultural Insurance Scheme is to be condoned.
 
The problem is that, besides ignoring the huge proportion of the rural population with limited or no assets, this partial, and yet to be implemented, response fails to engage the three most important bottlenecks to any successful management of the consequences of drought. The first is the inadequate reach of the public distribution system in most states, especially in the rural areas, which makes the sheer task of reaching food to those who would need it daunting. In fact, government policy over the last few years has moved in the direction of diluting the system rather than strengthening and expanding it. As a result the government would have to reach its stocks to the needy through the private trade, which is bound to resort to speculative hoarding, since prices are expected to rise in a situation like this. This makes the presence of large stocks in government godowns an inadequate insurance against both localised shortages as well as price increases.
 
The second is the fact that the government's stocks do not contain significant amounts of the commodities in whose case the shortfall in output is likely to be the largest. While the availability of large foreign exchange reserves with the government facilitates import of these commodities, this would have to be through the private trade route in the current liberalised trading environment. Here again private speculative activity is bound to drive up prices.
 
The third is the government's aversion on fiscal grounds to launching a massive food-for-work programme, and therefore its lack of experience in managing such a programme. It is almost common knowledge now that a phenomenon like drought can be devastating not so much because of the lack of access to food supplies but because of the lack of the requisite employment and income that allows people to purchase the food that is available. Over the last few years when evidence was mounting that foodstocks were accumulating in government godowns even while poverty was persisting at relatively high levels and reports of starvation were flowing in from parts of the country, there were many who made a case for using the food surpluses as a means to launch a more extensive food-for-work programme that would provide employment and incomes to the poor as well stimulate demand for an industrial sector which was burdened with excess capacity.
 
If the government had not ignored these calls on the grounds that it was not a fiscally prudent strategy to adopt, it would have been in a position to quickly respond to the income reduction-induced threat of near famine conditions. Not having responded, however, it would, even if it tries, be hard put to set up and manage such a large exercise in time to avert any significant human damage.
 
These bottlenecks to dealing effectively with the consequences of drought are already having their impact. Quite early into the monsoon season, expectations of monsoon failure have triggered an increase in the prices of many agricultural commodities, stocks and foreign exchange reserves with the government notwithstanding. To quote one example, in the Mumbai wholesale market, the price of groundnut oil spurted from Rs 420 per 10 kg trading lot on July 6 to Rs 438 by July 13. Refined palmolein gained Rs 17 during the same period to close at Rs 347 and refined soybean oil jumped from Rs 330 to Rs 346 per 10 kg. On July 15, groundnut oil jumped further by Rs 10 to Rs 448 and palmolein by Rs. 11 to Rs 358.
 
Meanwhile governments in the affected states are sensing the danger of loss of employment among the large mass of workers who are either partially or completely dependent on wage employment for a living. Not surprisingly, they have approached the Centre for a combination of food and cash support for relief and food-for-work programmes. Andhra Pradesh for example has asked for Rs 610 crore by way of financial assistance and 10 lakh tonnes of food grains for the purpose. While a "centre-friendly" state like AP is likely to get a quick response, past experience suggests that Delhi would be far less receptive to demands from many other states, making the rural workers and farmers the victim of cynical political strategies.
 
Thus, three immediate outcomes are likely, unless the monsoon recovers sharply. First, a decline in farmers' incomes as a result of loss of production and livestock. Second, the loss of agricultural workers' livelihoods as a result of the contraction in rural wage employment. Third, a sharp increase in food prices, as a result of speculation encouraged by the limited reach of the government's public distribution system as a means of reaching food to the poor, especially in the rural areas. Since, for reasons elaborated earlier, the government's efforts to counter these tendencies can only work partially, any further failure of the monsoon can be devastating.
 
The second-order fall-out of the decline in incomes and rise in food prices would be a sharp erosion in the real purchasing power of a large section of the population and a greater reticence on the part of the government to undertake expenditures that can aggravate the inflation. Both of these are bound to squeeze the demand for manufactures. Thus an intensification of the recession, which already afflicts the industrial sector, could ensue.
 
Thus the complacence, reflected in official statements, generated by the government's huge food stocks and large foreign exchange reserves is by no means warranted. But such complacence clearly dominates, encouraged by the tendency to see in the drought an opportunity to offload the embarrassingly large stocks of foodgrain in government godowns.