A report from DBS Bank economist Radhika Rao says that they are optimistic about the improvement in farm production this year on the back of a good monsoon.
The report said that India’s South-West monsoon has recovered in the past week. The monsoon deficit is now down to just 2 per cent against about 9 per cent a fortnight earlier.
The spatial distribution is also good and three-fourths of the economy has received normal to excess rainfall, crucially in the North-West and Central India. Crop sowing activity is catching up, along with an improvement in the reservoir levels. Reservoir levels are at 32 per cent of live capacity, the report said.
Good rains will support agricultural growth amid signs of lingering distress, the report noted. Inflationary expectations are also likely to be anchored, though a material respite to inflation will also hinge on other variables falling into place.
Putting in a caveat, Radhika said: “The impact of a good monsoon on headline inflation is, however, less direct as past episodes of a strong monsoon did not necessarily mean low inflation as other offsetting factors played a bigger hand. High core inflation and a need to maintain financial stability is expected to keep the central bank on a tightening bias in 2H FY19.”