June monsoon rains hope

Southwest monsoon reaches Delhi, may cover entire country in 1-2 days

The southwest monsoon, 28 per cent above normal as of Thursday, might cover the entire country in the next couple of days. This could provide relief to policymakers, who fear an adverse impact of deficient rains on farm production and food inflation. They, however, might be keeping their fingers crossed due to uncertain predictions for rain in July.

The monsoon reached Delhi on Thursday, four days ahead of its scheduled arrival, the India Meteorological Department (IMD) said. "The rains have arrived over Delhi and chances are it will cover the entire country in the next one-two days," IMD Director B P Yadav told Business Standard.

He added only a small part of Rajasthan was yet to record monsoon rain. This area, too, would get rain soon, he said.

As of Wednesday, monsoon was normal or excess across 88 per cent of the country's total area and deficient or scanty in the rest. It was poor in west and east Uttar Pradesh, Bihar and Kerala.

The monsoon, after a delayed onset over India, has rallied strongly, belying most predictions. Since June 1, India has received 159.2 mm of rain, against the normal of 124.6 mm, easing initial concern over sowing of kharif crops, though the area covered by the second week of June was less than 10 per cent of the normal area.

During June 18-24, the southwest monsoon was 44 per cent more than normal, the best weekly performance so far this season.

In the first week of June, the total area under kharif crops was 8.5 per cent less than in the corresponding period last year. By June 19, this narrowed to 7.35 per cent. The area is expected to further increase in the coming weeks, as the southwest monsoon reaches the rain-fed central, northern and western parts of the country.

Though agriculture's contribution to India's overall gross domestic product has declined through the years, it still has a huge impact on food prices.

Besides, rural areas are under distress and dismal farm production could aggravate it, hitting demand.

In 2014-15, agriculture and allied activities grew only 0.2 per cent due to uneven rain during the kharif season and unseasonal rain and hail during rabi. But overall, GDP rose 7.3 per cent. In the third and fourth quarters of 2014-15, production in the agricultural and allied sectors contracted 1.1 per cent and 1.4 per cent, compared with growth of 3.8 per cent and 4.4 per cent in 2013-14, respectively.

In 2014-15, agricultural growth was the lowest since the new GDP series was introduced, with a base year of 2011-12. Farm growth in 2012-13 was 1.2 per cent.

A change in the methodology of GDP calculation and growth of 2.1 per cent in horticulture crops, fruit and vegetables in 2014-15 saved the day; else, the numbers could have been worse.

There has been stress on the food inflation front since 2006-07, though it eased in 2014-15, with Wholesale Price Index-based rate of price rise declining to 6.3 per cent.

If food inflation doesn't fall much, the Reserve Bank of India (RBI) might not cut the policy rate much, as sought by industry.

These days, RBI looks at Consumer Price Index (CPI)-based inflation, which stood at 6.59 per cent on an average during 2014-15. RBI had set a target of eight per cent CPI inflation by January 2015 and six per cent by 2016. For January this year, it stood at 5.11 per cent.

"On the whole, the performance of the southwest monsoon so far has been good and it is reflected in the increase in pulses and oilseeds acreage, but if July rains are bad, it could have an impact on the final output," said Madan Sabnavis, chief economist, CARE Ratings. He added RBI should consider the performance of the monsoon till August, as well as the food inflation data, before deciding on reducing rates. "If any of the two parameters isn't conducive, I think the bank would defer a rate cut."

In June, India gets an average of 164 mm of rain, the lowest in the four-month southwest monsoon season that ends in September.

For this year, the IMD has forecast below-normal rain, while private weather forecasting agency Skymet has said the monsoon will be normal. For July, IMD feels rain will be 92 per cent of the long-period average, which is below-normal, while Skymet is confident it will be normal.

"There will be considerable decrease in rainfall activity over the northwest, central and parts of peninsular India during the next 15 days, while near-normal rainfall activity is likely over parts of east and northeast India during first 10 days of July," the IMD said in its latest update.

Most of the monsoon showers happen during July and August. As this is crucial for the growth of crops, it has a lasting impact on the final harvest. July rain accounts for 33 of the four-month average, while that in August contributes 30 per cent. Owing to good rain in March-May this year, water levels in 91 reservoirs across the country are at comfortable levels. As of June 19, this level stood at 39.05 billion cubic metres, 103 per cent of last year's storage during the corresponding period last year and 139 per cent of the average storage for the past 10 years.