Kharif sowing begins across India

Sowing of kharif (summer) crops has commenced in most parts and farmers have sown rice in 0.2 million hectares so far, according to the agriculture ministry.

Sowing of kharif crops begins with the onset of southwest monsoon in June, while the harvesting starts from October. The government said the preliminary reports on sowing of kharif crops have been received from states.

On Friday, it was reported that rice - the main kharif crop - has been sown/transplanted in 0.2 million hectares; pulses in 0.2 million hectares and oilseeds in 0.08 million hectares.

The planting of commercial crops sugarcane and cotton is in progress.

Sugarcane has been planted in 4.4 million hectares, while cotton in 1.7 million hectares so far, the statement said. The ministry did not give the comparable figures on sowing.

Amid chances of subnormal monsoon this year, as predicted by the India Meteorological Department (IMD), the ministry has advised state governments to be ready with contingency plans to minimise impact of erratic rains. It is also working on certain relief measures such as providing subsidy to buy seeds for resowing and diesel for irrigation to protect the standing crops.

El Nino risk

The El Nino risk is expected to keep inflation elevated and the Reserve Bank of India on a "long hold" as the first rate cut by the central bank is likely in early 2015 rather than this December, said Bank of America-Merrill Lynch in a report. "If rains are normal, CPI inflation should drop to 7-7.5 per cent by March 2015. If the El Nino impacts the kharif harvest, rising food prices could push up CPI inflation to 8 -10 per cent, essentially irrespective of monetary policy action."

The IMD early this week cut its June-September monsoon forecast to 93 per cent of the long-run average from an already below-normal 95 per cent projected earlier.

The chance of an El Nino during the monsoon has also been hiked to more than 70 per cent, from 60 per cent. "We continue to expect RBI to remain on long hold. An El Nino will likely push the first rate cut to early 2015 from December," the report said.

However, the report said the picture is likely to be clear only around July.

A five per cent change in food prices impacts CPI inflation by 250 basis points.

The report estimates that an El Nino poses a 50-75 basis points risk to its 5.4 per cent FY14 growth forecast.

The Reserve Bank on June 3, left key rates unchanged and unlocked about Rs 40,000 crore of Funds by reducing the amount of deposits banks are required to park in government securities.

This was the second time in a row that interest rates have been left unchanged amid demands for moderation to spur growth.