Monsoon hit India's mainland in the southern coast of Kerala a day ahead of schedule on Monday, raising hopes of better rains this year that will raise farm output, help rein in food inflation and boost economic growth.
The India Meteorolgical Department says the June-September monsoon rains would be 98 per cent of the 50-year long-term average this year. Last year, the country saw the worst rainfall since 1972 that damaged Kharif crops and pushed up prices of food articles.
As over 60 per cent of the country's cultivable land is rain-fed, the monsoon showers are critical to major crops such as rice, sugarcane, soyabean and edible oil. Finance Minister Pranab Mukherjee recently drove home the point when he said in India monsoon is "the real finance minister".
Indian economy grew by 7.4 per cent for 2009-10, with a growth of 0.2 per cent in agriculture for the year. Betting on good monsoon rains, the government expects the economy to expand at 8.5 per cent in the current fiscal.
"The agricultural output for next year is likely to be better given the positive forecast of the IMD with respect to this year's monsoon," said Shanto Ghosh, principal economist, consultancy firm Deloitte.
"While it is ambitious to expect a growth rate of 4 percent for agriculture, it is reasonable to expect that the agricultural output next year will see an annual growth rate of 2 to 2.5 per cent which will be a good step towards the path of food security for the nation," Ghosh said.
A good farm output has its impact also in the international commodity market as India is the second largest grower and consumer of rice, wheat and sugarcane.
A commerce ministry official said the government may think of lifting the curbs on wheat and rice exports if there is a "good monsoon".
However, he added that if the European debt crisis spreads "there could be a problem. The EU is an important destination for our exports."
Economists said the timely onset of monsoon has raised prospects of improved production and help tame the rising food prices.
The sugar industry is also hopeful.
"With the improved outlook for the next crop, we do not see the prices going up. We are expecting the domestic production in the current season (October 2009-September 2010) to be around 18-18.5 million tonnes, which is good enough. So duty-free import of refined sugar is no longer needed," said Sunil Kakria, managing director of Mawana Sugars.
The government last year allowed duty-free import of sugar in a bid to bring down retail prices which had gone up over Rs.50 per kg.