IMD forecast bodes well for agri sector

Chennai: The India Meteorological Department’s (IMD) above-normal rainfall forecast for 2024 southwest monsoon (June-September) bodes well for the agriculture sector and will also keep a check on food prices, an economist with Bank of Baroda said. On Monday, the IMD said the 2024 southwest monsoon seasonal (June to September) rainfall over the country, as a whole, is most likely to be above normal (greater than 104 per cent of the Long Period Average - LPA).

“Quantitatively, the seasonal rainfall over the country, as a whole, is likely to be 106 per cent of LPA with a model error of (plus/minus) 5 per cent. The LPA of the season rainfall over the country as a whole for the period 1971-2020 is 87 cm,” the IMD said. According to IMD, moderate El Nino conditions are currently prevailing over the equatorial Pacific region. The latest Monsoon Mission Climate Forecast System (MMCFS) as well as other climate model forecasts indicate that the El Nino condition is likely to weaken further to neutral El Nino Southern Oscillation (ENSO) conditions during the early part of the monsoon season and La Nina conditions are likely to develop during second half of monsoon season.

Reacting to the southwest monsoon forecast, BoB Economist Jahnavi Prabhakar said the prediction comes in the wake of the extreme heatwave conditions ongoing in the country. “The water reservoir level has also been lower at 33 per cent of their total capacity compared with 39 per cent reservoir levels noted last year (as of April 12, 2024). However, the expectations of normal monsoon bodes well for the agriculture sector and will also keep a check on food prices,” she said.

The Reserve Bank of India (RBI), while retaining its inflation and growth projections, in its recent monetary policy statement had assumed a normal monsoon which will also be positive for the kharif crops, Prabhakar added.

Out of the last 8 years, this is the first time in 2024 that the IMD has forecast above-normal rainfall (104-110 per cent of LPA) in its first forecast. In 2022, India had above-normal rainfall, against the expectation of normal rainfall. Last year in 2023, in line with expectations, the country actually witnessed normal rainfall at 94 per cent of LPA, Prabhakar added.

A normal monsoon is critical for India’s agricultural sector, with 52 per cent of the net cultivated area depending on it. The monsoon rains also play a crucial role in the replenishing the water levels in the country’s reservoirs across states which can be used for irrigation for the next crop season.

Rain-fed areas produce nearly 90 per cent of millets, 80 per cent of oilseeds and pulses, 60 per cent of cotton and support nearly 40 per cent of India’s population and more than half the livestock.

In 2023, India experienced “below normal” rains and an abnormally dry August largely due to El Niño conditions. The monsoon had got off to a delayed start in June after which there was excess rain in July followed by a deficit in August and then excess rains in September again in certain parts of the country, such as Punjab and Haryana, which hit the standing crop.

This had resulted in a sharp increase in the prices of vegetables, especially tomatoes and onions that triggered a spike in inflation and stretched household budgets. Rising prices of rice, wheat, pulses and spices push up the rate of inflation and stretch household budgets leaving less money to spend on industrial goods. The government also intervened to keep prices in check by banning exports of wheat and non-basmati rice and onions. This again leads to a drop in farm incomes and also exports which earn vital foreign exchange.

The high inflation rate caused by a spike in food prices also forces the RBI to increase interest rates, which, in turn, has a dampening impact on economic growth as loans for industry and consumers turn costlier.