Forecast for More Monsoon Rain in India Bolsters Crop Prospects

India will receive more monsoon rain in the coming week, brightening the outlook for crops and easing concerns of the first El Nino since 2010 causing a spike in food prices in Asia’s third-largest economy.

Crops from rice to soybeans and lentils will benefit from increased rainfall across the country in the next seven days, according to the India Meteorological Department. The return of showers early this week ended a dry spell in central regions and helped the main grain-producing northern regions record good rains, the forecaster said on Thursday.

The revival in monsoon augurs well for India’s agriculture output and may help contain retail inflation as food costs account for about 50 percent of the nation’s consumer prices. Prime Minister Narendra Modi is banking on normal rainfall to bolster economic growth and buoy sales of everything from smart phones to cars among the 833 million people who depend on farming in India. The area under various monsoon crops are 63 percent higher this year.

“There will be better output of monsoon-sown crops,” Sunil Kumar Sinha, principal economist at India Ratings and Research Pvt., said from New Delhi on Thursday. A bumper harvest may curb food prices and put pressure “on the Reserve Bank of India to either pause on interest rate or the likelihood of another rate cut will increase.”

Monsoon Risk

The central bank has said it’s closely watching the rains after identifying a monsoon shortfall as the biggest risk to the economy that depends on agriculture for about 15 percent of gross domestic product. Inflation accelerated 5.4 percent in June, within the central bank’s target of 6 percent by January but more than economists had estimated.

The surge in monsoon cut the rainfall deficit this month to 24 percent on Thursday from as high as 33 percent on July 14, according to the bureau. That compares with 16 percent above-average rain in June and the 7 percent overall deficit now.

India has forecast El Nino will curb this year’s monsoon rains to 88 percent of average for the first back-to-back shortfall in three decades as the weather event strengthens in the Pacific Ocean. El Ninos can disrupt harvests around the globe by baking parts of Asia, dumping rain across South America and bringing cooler summers to North America.

Farmers in India depend on the monsoon, which accounts for more than 70 percent 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.

“Three things -- the quantum, temporal and spatial distribution of rainfall -- that impact the crops are good so far,” N. Chattopadhyay, a deputy director general at the meteorological department, said by phone from Pune on Thursday. “Fortunately all the rice growing areas received good rain so far this year. There is no direct impact of El Nino on monsoon.”

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