Monsoon: Little to cheer about despite pick-up

Though the overall deficit has been reduced to 14% below normal, 45% of the country received scanty rainfall

Monsoon has improved considerably in the month of August bringing the overall deficit to 14 per cent below normal for the season. The northwest region of the country, which was among the most severely affected, has received a good spell of rains. Deficiency in the region has come down from 35 per cent of normal at the start of the month to 20 per cent at present. Indian Meteorological Department (IMD) scientists are saying that if the trend continues, the deficiency can come down to 10 per cent by the end of the month.

Prima facie, though the news sounds good, the devil is in the details. Consider the following facts:

 

• Though there is a shortfall of 14 per cent in overall rainfall for the season, 45 per cent of the country has received deficient/scanty rainfall

• According to a Morgan Stanley report, 26 per cent of the area is affected by moderate drought while 10 per cent will be affected by severe drought

• The regions and crops affected by severe drought are primarily rice growing areas such as Haryana and Punjab and cotton growing areas like Haryana, Punjab and Saurashtra

• Overall crop area under cultivation is down 13 per cent for cereals, 11.5 per cent for pulses, rice 3.7 per cent cotton 5.2 per cent and oilseeds 3.2 per cent. Sugarcane is witnessing higher area under cultivation, which is up by 4.4 per cent

• Erratic pattern of rainfall can impact crop yield, says Morgan Stanley

• Reservoir levels are at 56.8 per cent of the storage capacity, compared with 69.4 per cent last year. These levels are however, in line with the 10-year average level of 56.5 per cent.

• Despite the pickup in monsoon, wholesale food prices have accelerated sharply by 21.2 per cent in August, indicating the rains have not fallen in areas where it matters

• In a recent investor forum organised by Edelweiss to gauge the impact of monsoon on the rural economy, it was concluded that rural slowdown in currently limited to consumer discretionary spends such as cars, two-wheelers and white and brown goods, where sales are sluggish and discounts are high. FMCG demand continues to be robust.

• However, fall in demand is more pronounced in rain deficient areas. FMCG sales have also been affected in these areas where consumers are opting for lower value products, though of the same brand

• A lot now depends on the monsoon in September, because that will decide the fortunes of Rabi crop.

 

A Business Standard report says that September rains have a strong bearing on rabi sowing, as good rainfall in the latter part of monsoon season leaves the soil with adequate moisture to aid sowing.

The impact of a deficient monsoon is getting visible in traces on the economy and the news is not good despite a pick-up in monsoon. The full impact can only be felt post harvest and September monsoons. The year 2009 was the last time when the country received substantially lower rainfall, but the crop and economy to a large extent was saved because of late rains in September and pick-in production in Rabi season. 

In a month’s time we will know if our luck is holding again.