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Below average rains could mean lower crops, higher inflation

Below average rains could mean lower crops, higher inflation
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First Published: Mon, Jul 21 2008. 11 49 PM IST
Updated: Mon, Jul 21 2008. 11 49 PM IST
New Delhi: India’s production of rice, corn, cotton and oilseeds may fall unless rains revive as the dry weather has slowed planting in the main growing areas, hampering government’s efforts to cool prices.
Rains are below average in Gujarat and Maharashtra, the biggest cotton growers, and in Andhra Pradesh, Karnataka and Kerala since the start of the four-month monsoon season on 1 June, according to the New Delhi-based India Meteorological Department.
“Rains must revive by the end of this month or output of the crops will get affected,” S.R. Chaudhari, director, agriculture with the Gujarat government said by phone from Gandhinagar. “If it doesn’t rain, after a week there’ll be a problem for survival of the standing crops.”
Crop shortages may fuel inflation from a 13-year-high, denting Prime Minister Manmohan Singh’s popularity after his party lost ground in nine of the past 11 state elections. Singh, facing the first confidence vote in a decade on Tuesday, told Parliament on Monday that his government has “focused on control of inflation and welfare of people” in its four years in office.
“A poor monsoon will surely have its effects percolate into the inflation numbers as it would mean a lower crop and reduced supplies,” ‘said Avinash Raheja, director for commodity marketing at Standard Chartered Bank in Dubai.
The June-September monsoon, which accounts for four-fifths of the nation’s annual rainfall, was below average for a second week this month. Rains this week will decline in Gujarat, Maharashtra, Andhra Pradesh and Karnataka, the meterological office said on 16 July. July showers account for a third of the rainy season and are crucial for sowing of crops.
As of 18 July, farmers had planted cotton in 5.8 million ha, 17% lower from a year earlier, while corn was sown on 4.1 million ha, compared with 4.26 million ha, according to the agriculture ministry. The area under oilseeds was little changed at 10.1 million ha.
Planting of rice was increased after the met department in May forecast normal rains this year. The lack of rainfall this month threatens the 14.9 million ha of the grain, 23% more than a year earlier.
“We’re worried about the rice under irrigated areas in our state as water position in reservoirs so far is not good,” Qamar Iqbal Khan, additional director planning with the agriculture ministry of Andhra Pradesh, said by phone from Hyderabad. “Unless there’s heavy rainfall by early August there will be problem.”
Andhra Pradesh is the second biggest producer of rice.
India’s dependence on agriculture means that a bad monsoon can slow economic growth. Lower farm output, which accounts for almost a fifth of the economy, may crimp the nation’s record 8.8% annual expansion since 2003, the fastest after China among the world’s major economies.
“How rainfall pans out will be particularly critical in 2008, since it is a year in which all growth drivers are likely to remain muted,” Rohini Malkani, a Mumbai-based economist at Citigroup Inc., said in a 18 July report. Growth may decline to 6.6% if the rains fail, Citigroup said, compared with its earlier estimate of 7.7%.
India’s monsoon rainfall will be 100% of the long period recorded between 1941 and 1990, a level deemed normal, the weather bureau said on 30 June. Rains were 4% above average until 16 July, the agency said last week.
“While the monsoon has so far been poor, nearly 60% of the season is ahead of us,” said Raheja. “Crop yields can improve at a fast pace if given favourable weather in the next four to eight weeks.”
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First Published: Mon, Jul 21 2008. 11 49 PM IST
More Topics: Crops | Inflation | Rains | Gujarat | Maharashtra |