Better monsoon to reduce price pressure in pulses: Study

With pulses inflation high at 34%, a better monsoon would reduce price pressure in lentils and in turn food inflation, a latest report has said.

Southwest Monsoon rains were lower by 16% as on yesterday. While June could still end with a marginal deficit, if rainfall remains adequate as forecast in July and August, it could provide much-needed support for growth and inflation, the report said.

"We believe monsoon's impact on food inflation will likely be primarily via pulses. Distribution of rainfall in pulse- growing states is uneven, with pockets of significant deficiency," Standard Chartered Bank said in its report 'India-Chasing the Monsoon'.

Pulses, oilseeds and cotton seem to be the worst hit by deficient rainfall in June. "This is a cause for concern given the elevated price pressure in pulses," it said.

Stating that pulses inflation is highly sensitive to monsoon, the report said only 16% of pulse-growing areas are irrigated. The drought in last two years has led to a spike in pulse inflation to 34% in last 12 months.

"Given the 2.38% weight of pulses in the Consumer Price Index (CPI), a fall in pulse inflation to single digits could shave off 40-50 bps from FY17 headline inflation," the report observed.

"A better monsoon would reduce price pressure in pulses and in turn food inflation," it added.

India Meteorological Department (IMD) has forecast better than normal Southwest Monsoon for the year. Close to 60% of rainfall and crop sowing happens in July and August.

Pulses prices in retail markets are ruling as high as Rs 198/kg due to shortfall in domestic output because of two consecutive droughts.

The country's pulses output is estimated to be 17.06 million tonnes in 2015-16 crop year (July-June) as against the annual demand of 23.5 million tonnes.