Monsoon rain in India will be below normal for the second time in three years, the weather office said, potentially lowering farm output and accelerating inflation which is the highest among Asia’s major economies.
Rainfall will be 95 percent of the 50-year average in the June-September season, Science and Technology Minister Pawan Kumar Bansal told reporters in New Delhi today. That compares with 98 percent predicted by the India Meteorological Department in April. The bureau defines normal precipitation as 96 percent to 104 percent of the long-term average.
Prime Minister Manmohan Singh is betting on adequate rainfall to harvest record quantities of food grain and lentils for a second year and cool inflation, which has led the central bank to raise rates for a 10th time in 15 months. Agriculture makes up almost 14 percent of the economy and a reduced harvest can lower rural incomes, hurting sales of tractors and cars.
“A subnormal monsoon can very easily put pressure on inflation,” Dharmakirti Joshi, a Mumbai-based economist at Crisil Ltd., the local unit of Standard & Poor’s, said by phone. “Expectations of food price increases will accentuate” if the monsoon rains aren’t adequate, he said.
The wholesale price index in India accelerated 9.06 percent in May after having increased 8.66 percent a month earlier, according to official data released on June 14. An index measuring wholesale prices of farm products including milk and lentils rose 8.96 percent in the week ended June 4 from a year earlier, according to the commerce ministry.
Food Prices
Global food prices will remain higher in the next decade than in the past 10 years as agricultural production slows and demand increases, the Organization for Economic Cooperation and Development and the United Nations’ Food and Agriculture Organization said in a joint report June 17.
India imported record quantities of sugar, lentils and oilseeds in 2009 following the weakest monsoon since 1972. A below normal monsoon this year may prompt the government to keep a ban on exports of wheat and rice, and extend curbs on shipments of sugar.
The South Asian nation, the world’s second-biggest grower of wheat and rice, may need as much as 70 million metric tons of grains to supply to its citizens at subsidized rates after the parliament approves a food security bill, Food Minister K.V. Thomas said in an interview last week. The government will keep a ban on exports of the food grain, he said.
Export Bans
India banned shipments of wheat in early 2007 and non- basmati rice in April 2008 to bolster domestic supplies amid a global food crisis. State reserves of food grains totaled 65.6 million tons on June 1, almost triple the quantity five years ago, according to the Food Corp. of India.
The forecast for below-average rains may further pressure India’s stocks, the worst performer in Asia this year, said Arun Kejriwal, a director at Mumbai-based Kejriwal Research & Investment Services Pvt.
“The market tone is currently bearish and confused. A comment like this will affect sentiments and only add to the pressure on stocks,” he said by phone today.
The Bombay Stock Exchange Sensitive Index rebounded from its lowest close in four months today, gaining 0.3 percent to 17,560.30. The gauge has lost 14 percent of its value in 2011.
Rainfall in July, the wettest month of the monsoon season, may be 93 percent of the long-period average as a weakening of La Nina weather conditions causes less precipitation, the forecaster said today. Showers in August are forecast at 94 percent, it said.
Cotton Region
Rains over northwest India, the nation’s main cane, cotton and rice-growing region, may be 97 percent of the 50-year average, the forecaster said. Central India, which includes the top soybean-producing areas, may receive 95 percent rainfall, while showers over the southern peninsula will be 94 percent, the weather office said. Showers over northeastern states, the top tea-growing region, may be 95 percent of the average.
Rains will be “well distributed” and won’t hurt crops, Ajit Tyagi, director general of the bureau told reporters.
India’s 235 million farmers depend on rain for irrigating crops from rice to cotton and sowing of monsoon crops begins in June and harvesting starts in September. The rains typically start over the southern Kerala state by the first week of June, before blanketing the entire nation by July 15..
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