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Monsoon forecast up, may rein in prices

Monsoon forecast up, may rein in prices
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First Published: Fri, Jun 25 2010. 11 18 PM IST
Updated: Fri, Jun 25 2010. 11 18 PM IST
New Delhi: In what could temper food price inflation and marginally offset wholesale price inflation, the India Meteorological Department (IMD) raised its monsoon forecast estimate by four percentage points.
Monsoon rainfall, the weather agency said, is expected to spread evenly across the country and, therefore, boost kharif—or summer crop—cultivation. This seasonal crop is the key contributor to India’s rice and maize—key cereals in the country’s agricultural basket—and sufficient sowing contributes to increased grain reserves.
The updated forecast was keenly awaited given last year’s drought—the worst in three decades. This led to a significant reduction in the kharif crop acreage and contributed to double-digit food inflation, now at 16.9%, prevailing since 19 months.
In April, the nodal weather agency had said rainfall between June and September would be 98% of the 50-year-average. On Friday, the department lifted its estimates to 102% of the normal, indicating heavy rainfall over the key monsoon months of July and August.
The June-September monsoon generates nearly 80% of the annual rainfall over the country and is vital for the economy, being the main source of water for agriculture, which generates about 17% of India’s gross domestic product. Other than the 60% of the country’s workforce that depends on agriculture, the rains are also important for traders dealing in food and cash crops as any shortfall injects volatility into the markets.
Last year’s drought had also forced India to import a record 5 mt of sugar and become the world’s top edible oil importer as it shipped in more oils than China.
The sowing of rice, India’s key summer crop, was down by 20% and water levels in reservoirs were down to 60% of their 10-year average during the monsoon months.
Even spatially, meteorologists say, the monsoon rainfall is expected to be in excess across the geographical subdivisions of the north-west, north-east and the south peninsula, with only a 1% deficit expected across central India.
“June rainfall is 11% short as of now. However, the monsoon’s active phase (continuous rain) is expected to set in by July. Already signs of the monsoon’s imminent progress towards north India are apparent,” said Ajit Tyagi, director general of IMD.
The weather agency’s increased confidence also stems from a pattern of still-developing sea-surface temperatures in the Pacific Ocean, called La Nina. This weather phenomenon, meteorologists say, always causes normal or excessive rainfall over India. “La Nina conditions have already set in over the central Pacific and historically, La Nina years that follow an El Nino year (such as in 2009) have always brought very good rainfall,” said Sivanand Pai, director (forecasting) at IMD. “Twenty-eight out of 30 such years since 1901 have seen excess or normal rainfall.”
Almost 60% of the monsoon rainfall takes place in July and August, making them the key months for sowing rice and maize, the most prominent of the summer crops.
Independent meteorologists also struck a positive note. “The conditions have been favourable for a good monsoon for nearly two months,” said Madhavan Rajeevan, a meteorologist with the Indian Space Research Organisation. “So I’m not surprised with the upward revision.”
The agency defines normal rainfall as and when the country, between June and September, gets an average of 89cm of rain, called the long-period average (LPA), or a 50-year average. Rainfall at 85.4-92.5cm (or 96-104% of LPA) is classified as “near normal”, as is with this year’s forecast. Rainfall at less than 90% is called a drought. Importantly though, IMD’s forecast models have an in-built error range of 5%.
S. Raghuraman of the Delhi-based commodity research outfit, Agriwatch, said that increased rainfall after mid-August didn’t bode well for crops. “The updated forecasts are good as long as it rains on time. Excessive rains during August and September tend to destroy standing crops. So, we have to hope for a normal July more than anything else.”
With inflation already near 10.16% compared with last May, the Reserve Bank of India is expected to hike interest rates by at least 25 basis points (bp) in its July policy review after it raised rates twice, by a total of 50 bp, since mid-March to cool prices.
Reuters contributed to this story.
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First Published: Fri, Jun 25 2010. 11 18 PM IST
More Topics: Monsoon forecast | Rain | Kharif | Agriculture | MET |