Concerns over monsoon have diminished a lot in recent weeks because of four positive developments. First, rainfall deficiency has reduced sharply from a century-high of 45% for June to 17% as on August 18. Second, sowing has caught up significantly from 40% below normal in mid-July to just 2.3% below normal on August 14. Third, the India Meteorological Department (IMD) has lowered the probability of a weak El Nino to 50% from 70% earlier, implying a less disruptive end to the monsoon season. Finally, reservoir storage, which was 14% above the last 10-year average by the middle of August, will have a salutary impact on rabi—or winter—crop.
The current momentum in rains is expected to continue for the rest of the monsoon season. The IMD, in its second long-range forecast, has estimated that rainfall is expected to be only 5% deficient in August-September. So, what does this mean for agricultural production and food inflation?
We expect agriculture growth to be capped at 1% this fiscal due to a statistical ‘base effect’ from the high 4.7% farm growth seen last fiscal. Also, the timeliness and distribution of rains have been haphazard this year. This will lower crop yields, particularly in the arid and semi-arid regions. In addition, while overall sowing may have improved, it is still 5.5% below the levels seen same time last fiscal. Crop-wise analysis also shows that some pulses (tur) and coarse cereals (jowar, bajra) have already suffered. Sowing of coarse cereals and pulses was 12.2% and 7.7% below normal, respectively, as on August 14.
The CRISIL Deficient Rainfall Impact Parameter (DRIP) scores, which capture both magnitude of the shock (measured as the deficiency of rainfall) as well as the vulnerability of a region (measured as a percentage of unirrigated area), show jowar, bajra and tur have been severely impacted this year. A major portion of jowar (43%) and tur (36%) are produced in Maharashtra. Even though rainfall deficiency in Maharashtra is lower than many states, it has high unirrigated area (80% of total farming area), and therefore the most vulnerable to rainfall deficiency. In the case of bajra, Haryana and Maharashtra, which account for 20% of India’s production of the cereal, have had very deficient rains, which compound the problem of an already large unirrigated area for the crop.
The saving grace this year is that rice, which accounts for 70% of India’s kharif season foodgrain production, has been less