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India forecast an above-normal monsoon this year, raising optimism that ample rains will spur crop output and economic growth, as well as prompt the government to ease curbs on exports of wheat, rice and sugar.
Precipitation during the June-September period is likely to be 106% of a long-term average of 87 centimeters, Mrutyunjay Mohapatra, director general of the India Meteorological Department, said at a press conference in New Delhi on Monday. The prediction has a margin of error of 5%.
The weather pattern is crucial for the world’s most-populous nation as it irrigates about half of the country’s farmland. Bountiful showers will not only help hundreds of millions of farmers in reaping good harvests, but also support the central bank’s effort to cool food inflation, which was at 8.5% in March.
The administration of Prime Minister Narendra Modi, who is seeking a third five-year term in elections starting this month, has taken some steps to contain food prices. It has extended restrictions on exports of several agricultural commodities, sold grains from state reserves and cracked down on hoarding.
Forecast of a normal monsoon bodes well for easing food costs, and headline consumer price inflation eventually, said Anubhuti Sahay, head of economic research, South Asia, at Standard Chartered Plc. A good monsoon is likely to boost rural demand and address concerns about tepid private consumption growth, she said.
The IMD’s outlook assumes significance for the nation, which witnessed the weakest rainy season in five years in 2023. Good showers will help winter crops such as wheat and some oilseeds, generally sown in October and November, as water reservoirs fill up.
Strong farm output may pave the way for resuming exports of key commodities and help soften global prices. India’s move to ensure domestic food security has hit several poorer nations, with rice prices in Asia climbing to a 15-year high earlier this year.
Asia’s third-largest economy may stay strong, after recording a growth rate of 8.4% in the final three months of 2023. It would be good for Modi, who is banking on India’s strong economic prospects, success of the government’s welfare programs and the fulfillment of populist Hindu-nationalist promises to extend his grip on power.
Favorable weather conditions will be a good news for energy planners. Electricity demand may soften as the use of irrigation pumps by farmers fall. The government is counting on good rains to boost its flagging hydropower output that has resulted in an increase in consumption of coal. Last year, poor showers were among the main reasons for a sharp jump in peak electricity demand in August and September.
The bureau said that the El Niño pattern, which tends to lower precipitation in the four-month period from June, may weaken during the early part of the season. However, La Niña, which normally brings more rain to parts of Asia, is expected to develop during August and September.
The country may also witness a hotter-than-usual summer before rains in early June, according to the IMD. “We have already seen two spells of heat waves in April and expect one or two more this month in different parts of the country,” Mohapatra said.
--With assistance from Ruchi Bhatia and Carolynn Look.
(Updates to add El Niño and La Niña details in 10th paragraph)
Source: Bloomberg
