Home / News / India /  The fallout of an (ab)normal monsoon

Officially, 30 September marked the closure of the June to September south-west monsoon, the lifeline for millions of Indian farmers, and businesses which depend on rural earnings. But this year, the monsoon is yet to retreat and has clocked 10% more rains when compared to the normal or 50-year average. Mint explains what it means for farmers, businesses and food inflation.

Can the monsoon be called normal this year?

Data from the Indian Meteorological Department (IMD) shows a little over half of India’s area have received normal rains, and as much as 30% of area have seen excess rains of 20% or more compared to normal. Due to excess rains in August and September floods were witnessed in states like Madhya Pradesh, Maharashtra, Uttar Pradesh, Gujarat, Assam, Kerala and Bihar. Distribution of rains were erratic, both geographically and over time, with a dry June leading up to one of the wettest Septembers ever. Worryingly, the monsoon will begin its retreat late, around the second week of October when crops harvests will be in full swing.

What does Monsoon 2019 mean for rural India?

India’s agriculture ministry has estimated a marginal decline in Kharif foodgrain production from 141.7 million tonnes last year to 140.6 million tonnes this year. However, the full extent of the damage will only be clear by end October. Continued rains in October may lead to post harvest losses over and above the damage to standing crops like soybean and pulses due to floods. This may impact rural incomes ahead of the festive Diwali season. But farmers can pin their hopes on a robust winter crop due to high soil moisture and plenty of water in the reservoirs.

What about food inflation?

Despite a lower harvest, a price spike for cereals and pulses are unlikely due to large stocks from previous years. Also, the losses of Kharif harvest is likely to be compensated by a robust winter harvest in the absence of any unseasonal rains. Though food prices have firmed up in the past few months, it was still less than 3% (August 2019) and marginally higher food inflation could be driven by seasonal non-availability of vegetables and rain-related disruptions in supply, like it was witnessed in the case of onions.

Will rural incomes recover after the bountiful rains?

Farm incomes are likely to be higher than last year when a drought was prevalent in several parts of India. However, the extent of income gains will depend on how wholesale crop prices move and the extent of Kharif losses due to excess rains, and whether there will be a recovery in non-farm rural wages. As the federal income support scheme for farmers covers more ground there will be higher money flow to rural areas and this could support demand. Farmer incomes will also depend on the price support interventions by the government and how speedily insurance claims are settled.

What about consumer demand?

The first quarter (April to June) witnessed a tepid growth in consumption of FMCG products. September too was a stressed month for many firms including automobile manufacturers. On 1 October, Marico, the maker of popular hair oil Parachute, said that demand and consumer sentiments weakened progressively during the quarter which manifested in slow growth. FMCG and consumer durable companies are now looking at the festive month of October for a recovery in sales. But a delayed harvest of crops, widespread damage to cash crops like soybean, and slow growth in rural wages may prove to be a significant hurdle.

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