The best start to the monsoon in at least 12 years in India, the world’s second-biggest producer of rice, cotton and sugar cane, may spur plantings and curb consumer inflation in Asia’s third-largest economy.
The country received 216.3 millimeters (8.5 inches) of rain last month, the India Meteorological Department said on its website. That’s 32 percent more than a 50-year average considered normal for the period and the highest since 2001, according to department data.
A bumper harvest may help India curb food prices and revive economic growth from the lowest level in a decade. Agriculture accounts for about a fifth of the economy, while 55 percent of the farm land does not have access to irrigation. Widespread rainfall has helped ease a drinking water shortage and relieved crops threatened by the worst drought in four decades in India’s western region.
“The better-than normal monsoon rainfall is obviously positive and favorable for the crops,” Shashanka Bhide, an economist at the New Delhi-based National Council of Applied Economic Research, said by phone. “The country should be getting closer to the record output level, and based on this, the price scenario will be moderate compared with last year.”
Farmers have planted crops including rice, oilseeds and cotton in 25.1 million hectares (62 million acres) so far this year, 85 percent more than the same period a year earlier, the Agriculture Ministry said June 28. More than 235 million farmers depend on rain for irrigating crops.
A strong start to monsoon should help boost agricultural output and hydro-electricity production, Barclays Plc said in a report last week. The monsoon will be a crucial variable in calibrating monetary policy with implications for both inflation and growth.
While inflation has “come off the peak,” consumer-price growth still remains “quite high,” Reserve Bank of India Governor Duvvuri Subbarao said June 7. The success of monsoon will be important in determining monetary policy in the next three months, said Subbarao, who lowered borrowing costs in January, March and May by 25 basis points at each meeting to boost investment in an economy that expanded a decade-low 5 percent last year. He held rates at the last meeting on June 17.
Consumer inflation climbed 9.31 percent in May from a year earlier, while the wholesale-price index increased 4.7 percent, a 43-month low, according to official data.
Northwest India, the main wheat, rice and sugar cane region got 120 percent more than normal rain in June, while the central region, the biggest soybean grower, received 67 percent more than the average, the bureau said.
“The start is good and what needs to be watched is July rainfall,” Dharmakirti Joshi, chief economist at Crisil Ltd., the Indian unit of Standard & Poor’s, said by phone from Mumbai today. “If rainfall is well behaved in July and August, then we can have a good harvest this year.”
Rice has been planted across 3.9 million hectares as of June 28, up 31 percent from a year earlier, according to the Agriculture Ministry. Oilseeds were sown in 6.07 million hectares, up more than fivefold from a year earlier, it said. Sugar cane was planted in 4.74 million hectares and cotton in 5.58 million hectares, it said.
Unprecedented floods and landslides in northern India on June 16, washed away vehicles, homes and roads and more than 1,000 people may have died, according to Vijay Bahuguna, chief minister of Uttarakhand state.
Rainfall will be 98 percent of the 50-year average of 89 centimeters in the four months through September, the weather bureau said on June 14. It defines normal precipitation as 96 percent to 104 percent of the average received between 1951 and 2000. Showers in July, the wettest month of the season, will be 101 percent of the average and more than the 87 percent last year, it said.