With a sombre start, spectre of a disappointing monsoon season lurks
MUMBAI : Clouds of a disappointing monsoon season are hovering over the Indian economy. The pace of rainfall was a letdown in June, which typically marks the beginning of the monsoon season. But as the chart shows, the cumulative rainfall was in the deficit zone last month.
More importantly, the trend seen in June is a departure from India Meteorological Department's (IMD) initial forecast of an above-normal monsoon this year. Moreover, reservoir storage levels continue to fall. As of 27 June, storage in 146 key reservoirs stood at about 20% of total capacity (lower than the previous week's 21%), according to a Barclays report dated 1 July.
All eyes will now be on the rainfall trajectory in July given that most of the kharif crop sowing activity is completed by this period. Spatial distribution will also be a crucial factor to watch out for. Plus, whether the rainfall in July is able to compensate for the gap in June remains to be seen.
Monsoon patterns tend to have a direct impact on prices of agricultural products, mainly vegetables, fruits and pulses. A worry is that sticky and elevated prices of these items could trigger the food inflation menace. Thus, making it tricky for the Reserve Bank of India to decide on interest rate cuts.
Unfortunately, the adverse impact of heat waves seen in various parts of the country along with a weak start to the monsoon, is already being felt on prices of essential items. "Per National Horticulture Board, on a CPI (consumer price index) weighted basis vegetable prices are higher by 21% month-on-month, which is higher than seasonal," IDFC First Bank said in a report dated 28 June. The increase is led by the jump in prices of tomato and onion.
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