After recent unseasonal showers and last year's deficient monsoon, there's a lot riding on this year's rains
New Delhi: From politicians to policymakers, farmers to corporate executives, and economists to stock market analysts, virtually everyone with a stake in the economy is waiting anxiously for the first monsoon forecast by the India Meteorological Department (IMD) on Wednesday.
After last year’s deficient monsoon and the recent bout of unseasonal rains, there is unusual interest in this year’s forecast, especially since it has the potential to influence inflation—which is well off last year’s peaks—reverse slowing rural demand and aid the nascent industrial recovery.
Politically, this year’s monsoon will be significant as Bihar, a state dependent on agriculture, will go to the polls by November.
The Bharatiya Janata Party is hoping to revive its fortunes in the state against a united opposition created after six constituents of the erstwhile Janata Dal decided to merge.
The forecast is crucial for agriculture, especially after the below-normal monsoon last season, said D.S. Pai, head of the long range forecasting division at IMD. It is important to see what happens to it this year after unseasonal rains in March and April, and reports of El Niño during the summer, he added.
El Niño is a weather phenomenon caused by unusual warming in the Pacific Ocean, resulting in atmospheric changes, potentially leading to a poor monsoon.
Last year, IMD had forecast that rainfall in June-September monsoon season would be 95% of the 50-year average, which is below normal rainfall. In its August review of the forecast, IMD cut the prediction to 87%, after rainfall in June came in at the lowest in five years.
Finally, the rainfall was estimated at 88% of its long period average, with northwestern states being the biggest sufferers—a little under a third of the country received deficient rainfall.
Still, despite the unseasonal rains and fears of the El Niño phenomenon, a private forecaster has predicted a normal monsoon.
India gets 70% of its annual rainfall in the monsoon, which irrigates half the country’s farmlands.
A normal monsoon will cheer farmers who have struggled to cope with last year’s below-normal rains. The situation has been worsened by the end of the global commodity super cycle, which resulted in lower food prices.
Unseasonal winter rainfall has worsened the problem. According to numbers released by the agriculture ministry on 26 March, about 11 million hectares (ha), accounting for a fifth of the winter crop in the country, was damaged by these showers. Data released on 8 April said 3.9 million ha of wheat has been damaged due to unseasonal rains, which revised an earlier figure of 6 million ha.
Private weather forecaster Skymet Weather Services Pvt. Ltd has already forecast a normal monsoon with an early onset, while the IMD, in its experimental forecast for South Asia, also forecast normal monsoon rainfall in most parts of India.
The forecasts come even as several weather agencies, including those of the US and Australia, have warned of a 70% chance of an El Niño this year. IMD itself says that its models show a 50% probability of El Niño forming in the summer this year.
“We’re going from one El Niño year to another, so chances of it affecting this year’s monsoon are less. There is more probability of normal monsoon rainfall this year, which should come as a relief for farmers after last year’s drought," said Jatin Singh, chief executive officer, Skymet. “We have also forecast strong rainfall in May and an early onset of monsoon, which should be helpful with early sowing."
Last year’s monsoon was 11.9% below the 50-year average, leading to drought-like conditions in parts of several states including Punjab, Haryana, Uttar Pradesh, Madhya Pradesh, Telangana and Maharashtra.
Reserve Bank of India (RBI) governor Raghuram Rajan, in his monetary policy statement earlier this month, cautioned that there were upside risks to the inflation projections emanating from a possible intensification of El Niño conditions, leading to a less-than-normal monsoon; large deviations in vegetable and fruit prices from their regular seasonal patterns, given unseasonal rain; larger-than-anticipated administered price revisions; faster closing of the output gap; geo-political developments leading to hardening of global commodity prices; and spillover from external developments through exchange rate and asset price channels.
“However, at this juncture, these upside risks appear to be offset by downsides originating from global deflationary/disinflationary tendencies, the still soft outlook on global commodity prices and slack in the domestic economy," he added.
Retail inflation surprisingly eased in March to a three-month low at 5.17% as food prices softened, despite the damage to the spring harvest, raising hopes of further monetary easing by the central bank in its next policy review in June.
Factory output also surprised with an increase of 5% in February compared with the year-ago period, on the back of a strong revival in demand for packaged consumer goods.
RBI kept its benchmark policy rate unchanged at 7.5% on 7 April and said it would wait for banks to pass on interest rate cuts that have already been announced before further easing. Some of the biggest banks in India have pared their base rate marginally since then.