Monsoon forecast: June rains disappoint, but Nomura not worried; here’s why

By: | Updated: June 29, 2016 9:22 AM

India’s monsoon season (June-Sep) has begun on a weak note. So far in June (1-26), rains are currently tracking 16% below the long period average (LPA). However, rains are forecast to improve in coming months (July-September).

monsoon stocks monsanto agricultureWith monsoon rains slow to start, sowing has taken a hit. Total sown area stood at 11.7% of normal sowing area as on 24 June, lower than 15.4% in 2015. Reservoir levels (at 15% of the live storage capacity) are at worryingly low levels. (Reuters)

India’s monsoon season (June-Sep) has begun on a weak note. So far in June (1-26), rains are currently tracking 16% below the long period average (LPA). However, rains are forecast to improve in coming months (July-September).

Region-wise, Central India (-30% below normal) and North East India (-24%) have witnessed the highest rain deficiency. Bigger states reporting deficient or scanty rainfall, such as Gujarat, Madhya Pradesh, Maharashtra and Rajasthan have a higher share in the production of pulses, oilseeds, coarse cereals and cotton, which could be at risk, if rains don’t improve.

With monsoon rains slow to start, sowing has taken a hit. Total sown area stood at 11.7% of normal sowing area as on 24 June, lower than 15.4% in 2015. Reservoir levels (at 15% of the live storage capacity) are at worryingly low levels.

Even as June rains have disappointed, we are not worried, as July rains matter more (for crop output) and they are forecast to improve. Assuming rains recover in July, we expect kharif production growth to rise to 3.2% y-o-y in 2016. This, coupled with a weak base, should push up agriculture GVA growth to 3.6% in FY17 from 1.2% in FY16, adding ~30bp to headline GDP growth.

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