The Reserve Bank of India’s MPC said that domestic economic activity exhibited signs of broadening. The south-west monsoon rainfall and reservoir levels stood above normal; kharif sowing was progressing well, although it was marginally below last year’s level due to uneven rainfall distribution. “The rapid progress of the monsoon has boosted crop sowing, which remains broadly on par with prior-year levels,” Rahul Bajoria, MD & Chief India Economist, Barclays, said in a report. The area sown through 29 July was now 2 per cent above last year’s level – 82.3mn hectares compared with 80.7mn hectares in 2021.
Barclays noted that the cumulative rainfall surplus has now narrowed to 6 per cent above normal. Rainfall took a breather last week, following the heavy downpours in the initial weeks of July. The rainfall deficiency continued to be concentrated in the northern parts of the country, especially the key farming regions of the Indo-Gangetic plain, which remains a concern. RBI MPC said that incidence of unseasonal and excessive rainfall can impact food prices, especially vegetable prices.
Moreover, greater transmission of input cost pressures to selling prices across manufacturing and services sectors may also create fresh price pressures. Persistently elevated cost of living conditions could translate to higher wages and further price increases, especially if pricing power of firms strengthen, RBI Governor Shaktikanta Das said.
Also read: IMD predicts normal monsoon in Aug-Sept
Barclays said that deficient rainfall in Uttar Pradesh and West Bengal may continue to weigh on rice output. Overall, the sowing of rice remains low (-13 on-year), although the high level of buffer stocks could help meet domestic demand for the staple. “The next two weeks will be critical, as we enter the last leg of the key sowing season, with August accounting for the remaining nearly 25% of sowing activity,” it said. Governor Shaktikanta Das in a meeting today said that the increase in rainfall has also helped to raise reservoir storage levels over the past few weeks. The storage in major reservoirs as on 28 July stood at 119 per cent of that in the corresponding period of last year and 139 per cent of the average during the last ten years.
It may be noted that as of 4 August, storage in 143 key reservoirs had improved to about 60% of total capacity, according to the Central Water Commission (CWC). This amounts to 106 per cent of the available capacity in the year-earlier period and 125 per cent of the 10-year average for this point in the season, Barclays said.