The monsoon rainfall will be important not just for the kharif crop cycle, but also to gauge water availability for the winter (rabi) crop cycle.
As India Meteorological Department (IMD) retained its outlook of an ‘above normal’ monsoon this year, India is rejoicing at the possibility of relaxation in elevated food inflation and also a revival in rural consumption. “A normal monsoon is critical this year, given that last year’s “below normal” rainfall with wide temporal variations weighed on the production of major kharif crops, said a Barclays report. Production of rice, pulses, and coarse cereals was lower in the 2023 kharif season than in the previous year. Food inflation too has remained in the 7-8 per cent range since November 2023, preventing sustained disinflation in the headline CPI towards the RBI’s target of 4 per cent. Furthermore, rural consumption also slowed over H2 FY23-24, partly reflecting lower kharif crop production.
The southwest monsoon made its landfall in India last week on 30 May, two days earlier than the usual onset date of 1 June. “The progress of monsoon rainfall will be keenly watched in the coming four months, as it will be important not just for the kharif crop cycle, but also to gauge water availability for the winter (rabi) crop cycle,” said Shreya Sodhani, Regional Economist, Barclays.
Given India’s expanding irrigation systems, reservoir storage levels have become important to India’s farm output. According to the Central Water Commission (CWC), as of 24 May, storage in 146 key reservoirs stood at about 24 per cent of total capacity, below the 10-year average (25 per cent) for this point in the season (last year it was at 31 per cent). Lower reservoir levels reflect the weak monsoon last year, with even lower reservoir levels in southern and eastern parts of the country compared with the national average.
India’s agriculture output has historically moved in tandem with the intensity of rainfall. “Even taking into account advances in irrigation and farming technology, the monsoon rains have a strong bearing on food prices, medium-term inflation expectations and consequently, monetary policy. That said, the decline in energy prices and persistent softening in core inflation is currently providing an offset. We expect headline inflation to average 4.5 per cent in FY2024-25, moderating from 5.4 per cent in in FY2023-24,” said Shreya Sodhani.
The Indian Meteorological Department (IMD) has forecast this year’s monsoon to be “above normal” this year, with cumulative rainfall at 106 per cent of long-period average (LPA). Skymet has a slightly lower projection of 102 per cent, which suggests rainfall will be within the normal range (96-104 per cent of the LPA). As per the IMD, ENSO-neutral conditions are likely over the equatorial Pacific in June, transitioning into La Niña conditions towards the latter part of the season, which are typically associated with good rainfall in India. This follows the strong El Niño observed over last year, which adversely affected rainfall in 2023.
Source:financialexpress.com