India (Rajasthan) - Heatwaves and rainfall deficiency in the pre-monsoon season threaten agricultural yields
Climate change-related events such as droughts and floods can have a significant impact on economic activities that require water consumption. Industries including agriculture, semiconductor manufacturing and hydro energy production are all affected by these unpredictable climate changes. Therefore, it is critical for businesses to access timely and accurate data on climate events to understand associated risks so that they can develop an effective risk mitigation strategy.
To monitor the drought risk, QuantCube developed two indicators; the Water Stress Indicator and Physical Risk Indicator. Using our proprietary algorithms these indicators leverage satellite imagery to provide accurate and granular insight for drought conditions and risks:
Water stress indicator: monitoring water surface fluctuations to detect potential risk for drought and water shortages globally including China, Indonesia, Russia, Taiwan, US, India and Brazil
Physical risk indicator: Monitoring temperatures and rainfall around the world at country, regional and corporate level to detect the potential risk of elevated temperatures and rainfall deficiency
Since the beginning of the summer season, several northern-Indian regions including Rajasthan, have been experiencing extremely dry weather. As Exhibit 1 indicates, Rajasthan is the largest state in India and its main economic drivers are agriculture and farming.
Based on the alternative data we process at QuantCube we observed the historical trend in average temperatures and rainfall levels in Rajasthan. Exhibit 2 indicates historical data for the month of April, while Exhibit 3 shows the month of May. Our analysis indicates that April 2022 was the second hottest month in the observation sample. It was also identified as the period with the highest deficiency in rainfall. The analysis for the month of May shows a similar pattern. May 2022 was the fourth hottest month in the observation sample. The month recorded the highest rainfall deficiency in our observation.
Our research indicates that elevated temperatures and insufficient rainfall cause stress on water resources, therefore, increase the risk of drought. Leveraging satellite images, we examined the changes in lake surfaces in near real-time. As Exhibit 4 and 5 indicate, most lakes and reservoirs in Rajasthan have been drying up in the last months. The area inside the green perimeter corresponds to the surface covered by water, while the area inside the white one corresponds to the original dimensions of the lake.
Exhibit 6 shows the average temperatures and cumulative precipitations in Rajasthan historically during the first 9 days of the month in June. The latest QuantCube data for June 2022 suggests that rainfall deficits continue, and temperatures remain elevated. Historically, the weather conditions improve in mid-June with the arrival of the monsoon season that brings torrential rains and reduces temperatures. This usually replenishes rivers, lakes and groundwater tables. However, we are yet to see the sign of monsoon and water stress risk continues to be high. This needs to be monitored closely.
The evolution of climate and meteorological conditions in the upcoming weeks/months will be key for the Rajasthan economy and the Indian economy as a whole. Indeed, India heavily depends on the rainfall that monsoons bring to satisfy its water demand. Agriculture, the backbone of the Indian economy that accounts for over 20 % of global GDP, requires sufficient rainfall.
Consequently, good monsoons usually encourage abundant crops, therefore, tend to boost economic growth. On the contrary, persistent droughts and erratic monsoons may hinder agricultural yields and translate into economic losses.
Will this year's monsoon be a good one and bring sufficient water to satisfy demand? With climate change, droughts and floods are likely to increase in frequency and intensity. To what extent will it impact the country’s agriculture and overall economy in the near future? QuantCube continues to monitor the situation in the upcoming months since it may potentially contribute to social-political and geopolitical instability.
