The current revival of monsoon should save the rabi crop from drought though the kharif harvest is beyond repair, according to Indranil Sengupta, India economist at Bank of America MerrillLynch (BofAML).

In a report released on Monday, he said that Indus waters - a proxy for moisture conditions in north Indian wheat fields - have now increased to 94 per cent of normal conditions from 55 per cent in mid-July. Water storage in the Bhakra, Pong and Thien dam reservoirs has climbed to almost 90 per cent of the normal.

“It, however, is too late to reverse the damage done to the ongoing kharif harvest. Just released sowing data show that all crops - barring sugarcane - continue to lag 2011 levels, although there has been a pick up in pulses in recent weeks,” it said.

Pulses sowing has improved to 7.2 per cent below 2011 levels from a contraction of 11.6 per cent in mid-July.

“BofAML is retaining FY13 5.6 per cent growth forecast despite better rains. The upside risk of 50 basis points to our 0.5 per cent agricultural growth projection, on account of revival of rains, is effectively neutralised by a 50bp downside risk to our 4.7 per cent industrial growth forecast, with the RBI delaying monetary easing and by extension, lending rate cuts,” Sengupta said in the report.

Thus BofAML expects rural demand to continue to slow in second half of 2012. On its part, it estimates that farm income will slow to 7.4 per cent in 2012 from 12.4 per cent in 2011.

gayathri.gururajan@thehindu.co.in

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Published on September 10, 2012