India hasn’t seen a strong monsoon so far, but no need to worry yet

India hasn’t seen a strong monsoon so far, but no need to worry yet

The monsoon in India has been a wet stream until now. The rainfall deficit between June 1 and September 6 was 9% of the long-term average (from 1961 to 2010). August has been particularly disappointing with almost 24% below normal rainfall.

As such, the levels in the water reservoirs are not high enough. Data released on September 2 by the Central Water Commission shows that live storage available at 130 reservoirs in India accounts for almost 65% of their total live storage capacity. Available live storage is 80% of last year’s corresponding period live storage and 94% of last ten-year average storage.

India’s agricultural sector is highly dependent on the timely arrival and dispersal of rains during the monsoon season. By extension, the income of the rural economy and, therefore, the demand is also governed by the rains. Experts aren’t too eager for rain just yet, and they say there are some comforting factors.

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Not alarming yet

While the distribution of rainfall in 2021 has been patchy, economists say it has been highly supportive, as most of the key food grain producing states have come up with the normal amount. The planting of crops for the kharif season has also been remarkable.

Furthermore, the Indian Meteorological Department (IMD) has said that the rains in September are more likely to be above normal (more than 110% of the long-term average).

“The surplus rain in September is expected to reduce the full-season deficit (June to September) to 4.8% from the current deficit of 9%,” wrote Gaura Sen Gupta, an economist at IDFC First Bank, in a report on 2 of September. this month has started well.

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Without a doubt, in 2021, we are much better positioned against the drought scenarios seen in some of the years of the last decade.

“Based on our irrigation coverage weighted rainfall indicator and agricultural GVA (gross value added), India’s rainfall deficit is only 3% below normal and is much better than the deficits of the drought year (CY14 and 15) from 17-18%, “analysts at JM Financial Institutional Securities Ltd said in a Sept. 1 report.

The report added, “However, the erratic pattern of rains in July-August ’21 affected agricultural-related investments, including tractor sales, but the overall growth trend is likely to reverse, as suggested by our controls. “.

What about food inflation? JM Financial analysts note: “Going forward, barring an extreme climate shock, food inflation is expected to be contained in the middle digits in the second half of 2002, mainly due to the subdued outlook for the inflation of cereals and vegetables “.

However, it is necessary to closely monitor how the September rains are shaping up. Any adverse outcome would affect agricultural production, Capital Economics said in its India Economics Update.

“Monsoon (kharif) crop production has steadily declined as a percentage of total agricultural production, from 60% in 1990 to less than 50% today. The share of agriculture in GDP (gross domestic product) has also fallen, from 30% in 1990 to 15% today, ”said the firm.

The result is that the health of the farms would be determined not only by the southwest monsoon, but also by the northeast winds.

“While both the spatial distribution of rainfall and the seeding trend indicate limited impact on kharif planting, there could be a risk to rabi crops if reservoir levels fall further. Good reservoir levels are essential for rabi crops, which mostly depend on irrigation facilities, “the IDFC report noted.

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As such, the outlook for India’s rural economy may well depend on how wet September is.

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