The Met continues to hold on to its 96% long period average (LPA) forecast. But others have started to weigh in the possibility of a weak monsoon. Analysts at Ambit Capital say that spatial and temporal divergences are not uncommon as usually July contributes around 33% of rainfall. Previous deficits suggests that a weak monsoon does occur at intervals of about five years. July and August could make up for the current defect. Given the current pattern, analysts estimate a 2% decline in crop area and a 4% decline in foodgrain production. If even July and August fail, impact will be more debilitating.
In 2002-03 when overall rainfall was 19% normal, July rainfall was 49% below normal and kharif production fell by a staggering 19.1%. In 1972-73, there was a 24% below normal rainfall and that year the country witnessed a 6.9% fall in kharif production.
This could have a significant impact on consumer companies as rural sales now account for between 2% to 10% of their revenues. Clearly, the second half of 2008-09 was saved from going completely under thanks to steady rural demand. Over the last few years, telecom and banking sectors too have been looking to the rural sector to boost their growth prospects in a near-saturated urban market. Over the last two years, rural demand was buoyed by 1.3% growth in foodgrains, 10% rise in the minimum support price and agricultural credit growth of around 24% (between FY2004 and 2009).