New Delhi: From politicians to policymakers, farmers to corporate executives, and economists to stock market analysts, everyone is waiting anxiously for the first monsoon forecast by the India Meteorological Department (IMD) to be released on Tuesday.
This year’s forecast has the potential to influence inflation which has been rising and is only around 1% below the RBI’s target for the March quarter.
This year’s forecast is especially crucial for the agriculture sector with reports pointing out that the El Niño weather phenomenon could occur during the later part of the year.
A.K. Sahai, head of climate research and services at IMD, Pune, said, “Weak El Niño will occur only at the end of September and will therefore not affect India’s south-west monsoon.”
El Niño is a weather phenomenon caused by unusual warming in the Pacific Ocean, resulting in atmospheric changes, potentially leading to poor monsoon.
Last year, IMD had forecast that rainfall in June to September would be 106% of the 50-year average, which is above normal. In its second outlook too it predicted above-normal monsoon, but the actual rainfall was around 97% of the 50-year average.
Private weather forecaster Skymet, meanwhile, has predicted slightly less than the average rains for 2017, due to fears of El Niño occurring at the same time.
Many international agencies have said there’s more than 50% chance of El Niño occurring this year.
India gets 70% of its annual rainfall during the southwest monsoon from June to September, which irrigates half the country’s farmlands.
Two years of deficit monsoon of 12% in 2014 and 14% in 2015 has led to a protracted period of drought and rural distress and rise in farmer suicides. In 2014-15, agriculture production contracted to 0.2%, while in 2015-16, it was around 1.2%. In 2016-17, because of the bounty showers, agriculture production is expected to bounce back to 4.2%, according to data from the ministry of agriculture.
The Reserve Bank of India (RBI), in its monetary policy review earlier this month, said the risks are evenly balanced around the inflation trajectory at the current juncture, but cautioned that there were upside risks to inflation projections emanating from a possible intensification of El Niño conditions.
There is rising probability of an El Niño event around July-August which could impact the food prices in the upcoming months, said the RBI review.
India’s factory output surprisingly contracted in February to 1.2%, while retail inflation rose to a five-month high in March to about 3.81% erasing any hope of a rate cut by the central bank in the near future.