A weak monsoon won’t alter RBI’s basic outlook
SummaryA shortfall in rainfall raises inflation risks even as crude oil prices add pressure. India’s central bank is unlikely to shift policy course. It cannot afford to signal a premature pivot
Rainfall during the monsoon from June to September has turned out weak, but not too short of India’s official forecast. Our met department had predicted ‘normal’ rainfall, which is defined as anywhere between 96% and 104% of the long-term average. This year’s precipitation, at 94.4%, was close to the lower mark, although still ‘below normal.’ Considering that El Niño had led to drier than usual conditions in Asia and past episodes of this tilt-away in Pacific warmth have seen outright droughts, we may actually have gotten away lightly. The shortfall could have been worse. Still, the high dependence of Indian agriculture on rain has caused some anxiety over the adequacy of our farm output. While kharif crops of summer (like rice) are directly rain-fed, mostly, many post-winter rabi harvests draw upon water reserves refilled by the monsoon. What also matters is how well the rainfall is spread across time and space. This year, it was both erratic in its progress over the season, with sharp monthly swings—July was bountiful, August painfully dry and September a relief—and uneven in its sweep across India’s landmass. Kharif crops could be hit, with our rabi performance at some risk as well.