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Monsoon forecast to drizzle hope on govt, markets

Monsoon forecast to drizzle hope on govt, markets
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First Published: Fri, Apr 23 2010. 01 44 PM IST
Updated: Fri, Apr 23 2010. 01 44 PM IST
New Delhi: India’s summer monsoon will be nearly normal this year, the government is expected to say on Friday, allaying fears over an event crucial to the economic fate of the world’s second most populous nation.
The weather office forecast, due around 4:00 pm, is closely watched by commodities and financial markets as well as the government, which is battling to rein in inflation against a backdrop of intense protests over rising food prices.
The monsoon winds bring 75 to 90% of the rainfall in most parts of India and are vital for crops, as 60% of cultivated areas depend entirely on the rains for irrigation.
Last year, the government’s forecast of a normal monsoon proved wrong and the country grappled instead with a baking drought caused by its worst rains in 37 years.
The government cannot afford another poor season that would further fuel food inflation, spur additional interest rate hikes and trim economic growth.
Now weather scientists say they are encouraged by the fact that two consecutive annual monsoon failures have only happened three times in the last 110 years and the El Nino phenomenon, which upsets normal weather patterns, is dissipating.
Good rainfall would help India’s farm output rebound after last year’s drought, which triggered a sustained rise in inflation that boosted food prices 17.7% in the 12 months to 10 April, and fuel prices by 12.5%.
The weather office has already said it expects good rains this year -- a view endorsed last week by scientists from Britain and the United States attending a conference held by the India Meteorological Department.
On Thursday, expectations of normal rainfall helped lift shares of Indian fertilizer firms, while bond yields eased ahead of the forecast, which traders are watching for cues on inflation and growth.
India is the world’s biggest sugar consumer, and the outlook for the global market seemed gloomy ahead of the forecast, with New York raw sugar futures ending near a week’s low on Thursday.
Last year’s drought forced India to import a record 5 million tonnes of sugar and become the world’s top edible oil importer as it shipped in more oils than China, and drove the government to consider imports of rice, a staple food for many citizens.
The annual inflation has shot up to nearly 10% while the food index was up more than 17% annually, the latest government data show.
Good monsoon rains would also ease pressure on the Reserve Bank of India (RBI) to further raise interest rates, analysts say. On Monday, the RBI raised its key policy rates by 25 basis points each, a step that was in line with market expectations.
The summer monsoon rains traverse the subcontinent from its southern tip to the Himalayan north during the months of June to September.
The formal monsoon forecast was initially set to be issued earlier this week but the weather office said it needed more time as it had sought more data from local and foreign scientists.
The weather office usually updates its forecast in June.
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First Published: Fri, Apr 23 2010. 01 44 PM IST
More Topics: Monsoon | Rainfall | Weather | Temperature | Markets |