Slow progress of monsoon spells trouble on growth, price fronts

The tardy progress of the monsoon has triggered fears of a fall in economic growth and a rise in inflation. There has been a deficit of 37 per cent in cumulative rainfall from June 1 across the country, with the monsoon yet to advance to Central and Western India.

“There is a very small chance of the monsoon reviving in the next four-five days. The forecast is that rains will revive in the first week of July,” said Shivanand Pai, Head of the Long Range Forecasting Division at India Meteorological Department (IMD), Pune.

The current dry phase cannot be attributed to the El Nino weather phenomenon, which is still developing.

A sub-par monsoon could pose challenges for the Centre, which is trying to reverse the slowdown in the economy and improve investor sentiment.

Though June accounts for about 15 per cent of the total precipitation, the dry spell has set off alarm bells in the farm sector.

“The delay in rains is a cause for concern. June is almost gone and there is hardly any rain. This will delay the crops and trigger a shift in cropping patterns,” said BV Mehta, Executive Director, Solvent Extractors Association of India.

According to the Agriculture Ministry, till June 20 the oilseeds acreage, at one lakh hectares, was down 85 per cent over last year. Acreages of rice and pulses, key kharif crops, were lower by 54 per cent and 31 per cent respectively over the previous year.

Need for imports Though granaries are brimming with cereals, the country may have to step up import of edible oils and pulses to meet rising demand. “We expect edible oil imports to increase to about 11 million tonnes this year, higher than last year’s 10.4 mt,” Mehta said. Last year India imported edible oil worth a whopping ₹60,000 crore.

For the consumer, the price and availability of edible oils should not be an issue this year on account of the global surplus, Mehta added.

However, prices of commodities such as onions, potatoes and vegetables have seen a spike in recent weeks, forcing the Centre to intervene and set the base price for onion exports.

RBI may hold rates Wholesale Price Inflation in May spiked to a five-month high at 6.01 per cent on rising food prices. Given the inflation situation, the Reserve Bank is unlikely to cut policy rates for now, bankers said.

Rating agency Crisil has decided to look at the monsoon situation and the Union Budget together and then take a call on whether the 6 per cent GDP growth forecast made earlier should be revised or not. But Crisil sees a downside risk to the 6 per cent GDP forecast made earlier for fiscal year 2014-15.

“We have not taken a call (on revising the GDP forecast). Rains could revive in July or August. But the current predictions are not encouraging. There is definitely a risk to agriculture. How much damage the shortfall in rains will cause is difficult to say,” said DK Joshi, Chief Economist at Crisil.

(With inputs from KR Srivats, Aditi Nigam)

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