Below normal rains may spoil new Govt’s party

The next Government at the Centre will not only inherit a sluggish economy, it will also have to deal with the consequences of lower rainfall.

In its first official forecast, the India Meteorological Department (IMD) has predicted that this year’s southwest monsoon rains will be just below normal.

Lower-than-normal precipitation could trigger a drought, impacting agricultural output, which could lead to lower economic growth and stoke inflation.

The IMD said that there is a 60 per cent probability for the occurrence of El Nino, a phenomenon that sees warming sea surface temperatures in the Pacific triggering drought in South-East Asian countries, including India.

“Quantitatively, rainfall from June to September is likely to be 95 per cent of the long period average,” the IMD said. The long period average is the aggregate of seasonal rainfall over the country from 1951 to 2000, estimated at 89 cm. The IMD forecast comes with an error margin of 5 per cent.

No onset date, yet A normal monsoon is categorised as one with average rainfall between 96 and 104 per cent of the 50-year average. The IMD said the probability of a normal monsoon stood at 35 per cent, while that of a below-normal monsoon was 33 per cent. There is a 33 per cent chance of a deficient monsoon, the weather body said but did not issue any region-wise forecast or the onset date for the monsoon rains. It will issue an update sometime in June.

“The first bit of news on the monsoon is disappointing. There is enough reason to be concerned but not to panic. Much will depend on the spatial distribution of rainfall over different geographies. We will have to wait for it to play out (before assessing its impact on economic growth),” said DK Joshi, Chief Economist at Crisil.

In recent years, runaway inflation had created challenges for policy makers in framing an appropriate monetary policy. But inflation has been softening in recent months.

With over two-thirds of farmland largely dependent on rainfall, a good monsoon is crucial for agricultural output. Last year, the monsoon rainfall was above normal, at 106 per cent of the 50-year average, boosting foodgrain output to a record high of 263.2 million tonnes. A rebound in the agri and allied sectors lifted overall economic growth to an estimated 4.9 per cent in 2013-14 from 4.5 per cent in the previous year.

“A below-normal monsoon was largely expected. What is more important is that it should not be accompanied by a geographical shift in rainfall. Anyway, we are not expecting a big jump in agricultural growth because of the base impact of last year,” said Soumya Kanti Ghosh, Chief Economic Advisor to the State Bank of India.

Market won’t be impacted “There may be a hiccup in momentum on account of the IMD forecast. But the election momentum is much larger and so the stock market will take the IMD announcement in its stride,” said Jagannadham Thunuguntla, Head of Research at SMC Global.

Foodgrain stocks in the Central pool stood at 38.11 million tonnes as on April 1 against the buffer and strategic reserve norm of 21.2 million tonnes.

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