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Home / Industry / El Nino threatens Narendra Modi inflation hopes by curbing monsoon deluge

New Delhi: The El Nino strengthening across the Pacific Ocean is threatening to curb India’s monsoon and hamper Prime Minister Narendra Modi’s chances of capping food costs after a wetter-than-normal June.

The Indian Institute of Tropical Meteorology predicts a “large-scale reduction" during the first half of July following rainfall that was 24% above average and caused Mumbai’s worst floods in 10 years. The El Nino that forecasters are likening to a record event almost two decades ago may disrupt sowing and stunt growth of rice, cotton and soybeans.

Modi is banking on a normal monsoon to help curb inflation and buoy sales of everything from smart phones to gold among the 833 million people who depend on farming in India. While the early downpours prompted the longest advance in Indian shares since January this week, the prospect of insufficient rain renews concern that damaged crops will boost food prices and prevent the central bank from lowering interest rates.

“We still expect a below-normal monsoon season," Donald Keeney, an agricultural meteorologist at Gaithersburg, Maryland- based MDA Information Systems, said in an e-mail. “The outlook going into early July begins to dissipate the showers a bit, especially in south, central and western India" as the impact of El Nino is felt, he said.

The weather system can disrupt harvests around the globe by baking parts of Asia, dumping rain across South America and bringing cooler summers to North America. It poses a risk to the global economy in the second half as it threatens to hurt crops and boost food prices, according to Citigroup Inc.

Food prices

This year’s El Nino, the first since 2010, has strengthened and is showing characteristics similar to the 1997-1998 event, Australia’s Bureau of Meteorology said Tuesday. That system was the strongest on record, according to the National Oceanic and Atmospheric Administration.

While the India Meteorological Department (IMD) has forecast El Nino will curb this year’s monsoon rains to 88% of average for the first back-to-back shortfall in three decades, the start to the season has been better than expected. Precipitation since the beginning of the month was 24% above normal, the department said Wednesday.

The Reserve Bank of India (RBI) said it’s closely watching the rains after identifying a monsoon shortfall as the biggest risk to the economy because agriculture accounts for about 15% of gross domestic product (GDP).

RBI Governor Raghuram Rajan, who cut interest rates three times this year, has said further action hinges on the monsoon rain. Consumer prices in India, where food costs represent almost half of the retail inflation index, jumped more than 5% in May, official data showed 12 June.

Crop planting

Modi has taken short-term steps to control food prices during his first year in office. These include selling some wheat stockpiles on the open market, pushing states to let farmers sell fruit and vegetables directly to consumers, and capping growth of guaranteed prices for cereal crops.

This month’s deluge helped farmers accelerate planting across most of the country, the weather bureau says. Growers depend on the monsoon, which accounts for more than 70% of rainfall, to grow crops, generate hydro-electricity and supply drinking water. Rain from June to September irrigates more than half the farmland, where sowing begins in June.

“The abundant rains early on in the season have allowed planting to progress very well in most areas," MDA’s Keeney said. “The dryness later this summer will take a toll."

Skymet Weather Services Ltd., the only private Indian forecaster, predicts a normal monsoon this year. Precipitation will be 102% of the average and El Nino will have little impact, the New Delhi-based agency said this week. Rainfall in 1997-1998 was at least 2.2% above average, government data show. Bloomberg

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