The June-September rainy season is critical for the nation’s crop output and economic growth at a time it’s battling the world’s worst Covid-19 outbreak. The disease has spread to rural areas, where about 70% of India’s more than 130 crore people live. Agriculture accounts for 18% of Indian economy.
Along with increased rainfall, the regional distribution has also improved, said Rahul Bajoria, chief economist at Barclays. Cumulative rainfall through July 25 is now broadly around normal levels, with the shortfall down to just 1.5% of the long period average, he said.
The spatial distribution, according to the IMD, suggests that below normal to normal rainfall is likely over many areas of central India and some areas over northwest India. Normal to above normal rainfall is most likely over most parts of peninsular India and northeast India.
Aditi Nayar, chief economist at ICRA, said based on the IMD’s latest forecasts, the 2021 monsoon appears set to exceed the long period average. But the distribution of rainfall has been rather uneven this year. Episodes of flooding, along with a year-on-year decline in kharif acreage, suggest that the rise in crop output is likely to be muted, she said.
Kharif area coverage, according to data by the Ministry of Agriculture & Farmers Welfare, contracted 4.7% to 848.15 lakh hectares up to July 30. But, QuantEco Research said, it is almost on a par with historical normal area sown up till the fourth week of July.
According to ICRA estimates, growth of gross value added in agriculture, forestry and fishing is estimated to be mild at 2% each in second, third and fourth quarters of FY22. Farm demand may, however, remain buffered by the modest rise in minimum support prices and the expectation of continued robust procurement, Nayar said.
A good monsoon will also help keep a lid on retail inflation. A normal southwest monsoon, along with comfortable buffer stocks, should help to keep cereal price pressures in check, the Monetary Policy Committee had said in it’s resolution in June.
The monsoon performance and distribution for the remainder of the season, QuantEco Research said in a report, will also help determine the pace of rural recovery.
Given the rise in agriculture prices, especially of oilseeds and pulses, a good Kharif output can translate into higher farm incomes, in addition to support from the government’s income transfer scheme of PM Kisan as well as strong impetus on foodgrain procurement seen over the past few agriculture seasons. Agricultural exports, too, have held up well, allowing a more durable consumption recovery in rural India, it said.