Monsoon rains will be below normal this year, the government said on Wednesday, in a setback to the Indian economy’s recovery from a global slowdown.
Poor rains could lower agricultural output, push up food prices and dent rural demand that was once a silver lining for India in the face of the global economic downturn.
It could also affect the government’s ambitious plans to provide cheaper rice and wheat to the 250 million people living below the official poverty line.
“Rainfall is likely to be below normal,” earth sciences minister Prithviraj Chavan told reporters.
Monsoon rainfall, which spans from June through September, will be 93 per cent of the normal or the historical average of 89 centimetres of rain. A deviation of more than 4 per cent from this level is considered below normal.
What is worrisome is that the India Meteorological Department (IMD) predicted the northwest region to get only 81 per cent of normal rainfall this season.
The northwest includes granary states of Punjab, Haryana and Uttar Pradesh.
The delay and deficiency in monsoon would put pressure on food prices, said Shankar Acharya, a former chief economic adviser in the finance ministry.
“What the exact impact would be depends on how much delay there is and finally how much rain we get,” Acharya said. “But we are lucky to have enough food stocks and if that is managed well, the pressure could ease.”
The news pushed up futures prices of soybean, soyoil, wheat, chana, guar, turmeric, jeera and pepper in Wednesday’s trading on the National Commodity and Derivatives Exchange.
At Azadpur, Asia’s biggest vegetable wholesale market in Delhi, prices of vegetables such as cauliflower, peas, ladyfinger and bottle-gourd have already gone up by about 50 per cent.
Traders estimate that this year supply is down by 25 per cent compared with 2008.
“If you see a poor monsoon heading for a 10 per cent deficiency, you might see a one percentage drop in GDP,” said Mridul Saggar, chief economist at Kotak Securities. “I don’t see a very perceptible drop. You could see a few points coming off.”
Agriculture accounts for a fifth of India’s gross domestic product and provides livelihood to nearly 60 per cent of the 1.1 billion-plus population.
The monsoon is crucial for kharif crops such as rice, soybean, sugarcane and cotton as nearly 60 per cent of the net sown area in the country has no access to irrigation and depends on rains.
Wednesday’s revised forecast of the monsoon came after it became evident that the monsoon was taking longer than expected to revive beyond the southern peninsula.
The monsoon hit Kerala on May 23, ahead of schedule, but got stuck around the Deccan plateau for more than 15 days because no low-pressure area developed in time over the Bay of Bengal to pull it northward.
Now it is slowly advancing and is expected to cover most of central and eastern India over the next week and reach the northwestern states by the first half of July, the IMD said.
The progress of monsoon through July will also depend on a possible El Nino effect. There is a high probability this year of El Nino, a weather condition marked by warming of the eastern equatorial Pacific Ocean waters that could affect the monsoon.
“We will have to keep a watch on El Nino,” Chavan said.
(With inputs from Reuters)