Boosting the chances of a more than 6% farm-sector growth and overall economic expansion of over 8% in FY17 — both predicted by government managers recently — the India Meteorological Department (IMD) on Thursday reiterated its April prediction of above-normal monsoon rainfall this year. The southwest monsoon would be 106% of the benchmark long period average (LPA), with a model error of ± 4%, the department said, even as it said its arrival at the Kerala coast, where it first hits the southern peninsula, was delayed by four to five days from the usual date of June 1. What would add to cheer is a 96% probability of the monsoon rainfalls being normal or excess. A normal or excess rainfall would doubtless boost the country’s kharif crops (paddy, pulses, cotton and oilseeds), besides ensuring sufficient soil moisture for the next rabi crops (wheat, pulses and oilseeds).
India witnessed deficient monsoon rains in the last two years, resulting in the prevailing drought in 10 states.
As far as region-wise distribution of the rains is concerned, the second long-range forecast released by LS Rathore, director general, IMD, said the northwest region will receive rainfall of 108% of LPA while central India and southern peninsula are expected to get rainfall at 113% of LPA. The northwestern region, however, is expected to get lesser rainfall of 94% of LPA, which is termed as “below normal”. Besides, the rainfall is likely to be 107% of its LPA during July and 104% of LPA during August, both with a model error of ± 9%.
“With adequate rainfall, our reservoirs whose water levels have critically fallen would be filled up and we will have adequate water for next rabi season as well,” Ashok Gulati, former chairman, Commission for Agricultural Costs and Prices, told FE.
The farm sector grew 1.2% in FY16 and contracted 0.2% in the year before. In the last quarter of the last fiscal, the sector expanded 2.3% compared with a 1% contraction in the previous quarter. While the overall GDP, helped primarily by a pick-up consumption, grew 7.6% in FY16, analysts say plentiful monsoon rains after two years will help revive farm sector growth and boost consumption expenditure further. There are, however, concerns that a resurgent rural economy — also being helped by the stepped-up government spending — could stoke inflation.
According to the Economic Survey, retail inflation will remain in the 4.5-5% range in 2016-17, within the central bank’s target of 5% by March 2017, despite an expected spiral in wage costs due to the Seventh Pay Commission. The survey has projected 7-7.75% GDP growth for 2016-17, compared with 7.6% for 2015-16.
According to the IMD, El Nino conditions which weaken the monsoon rains are currently at a “neutral position” and there is a 50% probability of La Nina conditions getting established during the later part of the monsoon season to boost rainfall.
The agriculture sector contributes about 15% of the country’s GDP and employs 55-60% of the population. The sector is also heavily dependent on the monsoon as only around 45% of the country’s cultivable area is under irrigation. Thus, whenever monsoon rains have been normal or above normal, it has a direct impact on foodgrain production, although their impact on the overall economic growth and inflation are rather nebulous (see chart).
The government expects the foodgrain output this year to be a record 270 million tonnes, compared with 253.23 million tonnes in 2015-16.