Indra gets angry : Indian Monsoon below normal

June 25, 2009

It is official now. On Wednesday the Indian Meteorological Department announced that the South West Monsoon has weakened and is likely to remain below normal. This can have some grave consequences for the economy.

The 2009 monsoon rainfall would be 93 percent of the long period average(LPA), the government said, lower than an earlier forecast of 96 percent. Over the four broad geographical regions of the country, rainfall for the 2009 South-West Monsoon Season is likely to be 81% of its LPA over North-West India, 92% of its LPA over North-East India, 99% of its LPA over Central India and 93% of its LPA over South Peninsula, all with a model error of ± 8 %.

The monsoon is crucial to India’s farm sector. This year, the monsoon has stalled after an early start. In the week ended June 17, rains were 51% below normal.

Poor rainfall in June could hurt growth, push up food prices and prompt more government spending to support farmers.The possibility of a further delay in the crucial south-west monsoon in the central and northern regions of the country could hit crop production countrywide. Kharif crops depend on south-west monsoon and account for 52% of the estimated food crop output of 229.85 million tonnes. Planting of such summer sown crops such as sugarcane, rice and soybean will be hit leading to more sugar imports in the sugarcane crushing season which starts in October.

If the monsoon doesn’t happen by July, Paddy crops will be seriously hit. Lower output of rice may force the government to continue with the ban on exports of non-basmati rice. A fall in soybean, the main summer sown oilseed, production may lead to more vegetable oil imports.

If the monsoon fails by July then the consequences could be far-reaching. GDP growth may drop to 5% this financial year. This would put extra pressure on the government, which is already dealing with a double digit fiscal deficit.

Economists say below normal rains could prove to be a big issue for agriculture and the hydro power sector. Some economists estimate farm sector growth at 1 percent, which could hurt industrial output and hurt the economic recovery underway. However, some economists say they would prefer to wait and see the distribution of monsoon rains in the remaining months to assess the impact on overall growth.

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