The chances of monsoon playing truant this year are rare as a year of poor rains is usually followed by normal rains, India Meteorological Department head Ajit Tyagi said here, raising hopes of better farm output and rural prosperity.
Historical data of weather observations signal good rainfall this year and the chances of a monsoon failure two years in a row are remote, Tyagi told a news agency here. Data from the department revealed that 17 out of about 20 droughts since 1901 were followed by near-normal rainfall. An official monsoon forecast is expected in the second half of this month.
?If we get good monsoon in 2010, the agriculture sector can hope for a 5.5% expansion in output this fiscal as against an estimated decline of 0.2% last fiscal?, said a Planning Commission member, who asked not to be named.
Economists said a good monsoon would surely mute food price inflation, which has inched up to 16.35% in the week ended March 20, partly a result of the poorest rains in more than three decades last year. Food price inflation has been a major headache for the ruling coalition as farm output shrank 2.8% in the December quarter of 2009-10, a faster reduction than the 1.4% fall in production in the same period a year earlier. It has also raised expectations that the RBI will tighten the monetary policy at its forthcoming policy revie w to rein in prices.
A normal monsoon would be good for the rural economy and it will benefit companies with rural exposure such as those in the fast moving consumer goods segment, said Crisil director and principal economist DK Joshi. ?It will dampen food inflation, particularly in milk and dairy products,? Joshi said. He, however, said the RBI would anyway tighten the monetary policy in the forthcoming review because the monsoon effect will be visible only later on. However, the central bank may not have to tighten the policy as hard as it would have to in the absence of normal rains, he said.
Prime Minister Manmohan Singh had said on February 23 that the country needs to ensure that the various schemes for supporting agriculture production, expanding irrigation and building rural infrastructure are implemented in the remaining two years of the 11th Five-Year Plan ending in 2012. If that is done, there is a good chance that farm output may come close to the 4% target for the five-year period ending 2012, he had said.
The mid-term review of the current Five-Year Plan projected farm sector output in 2009-10 to shrink by 0.2% this fiscal. Better agriculture output is critical for the inclusive growth the government is hoping to rely on to retain its mandate, as a majority of the population depend on the sector for their livelihood.
Normal monsoons would also improve sentiments in the equity markets, particularly for automobile and FMCG companies.