The India Meteorological Department's (IMD) forecast on the south-west monsoon indicates that it would be 96 percent of long period average (LPA) which is good news for the country. While it is still below the long-term average, it is higher than what Skymet had projected which was 93 percent. Therefore, this would be taken positively by the market.
What does this forecast actually mean and how important it is? This is the first forecast made by the IMD while the second one will follow in the first week of June after the monsoon officially sets in. This may be a bit too early to draw a conclusion but given that Skymet was pessimistic, this one allows one to take a more positive view of the monsoon. It is, however, definitely a bit too early to form firm conclusions. In the past too, it was observed that similar forecasts had not led to comparable results in terms of crop output outcomes.
The forecast says that it would be 96 percent of the long-term average which is encouraging provided it materialises. However, it does not say anything about the spread of the monsoon as well as the arrival of the same which are probably more pertinent today.
We have seen in the past that delayed monsoon has implications for the crops as sowing is dependent on the arrival of the rains. Late arrival can defer sowing which in turn can have an impact on the final output. At times, farmers switch crops in case the rains come in very late and hence such forecasts would be only one indicator that they would be watching.
However, the fact that the chances of the El NiÃ±o impacting the course of the monsoon has been dispelled by the IMD is a major relief as otherwise, this would have been playing in the minds of farmers. This fear has been assuaged by the IMD and can be taken as a positive outcome of this forecast provided.
The other thing is that the forecast does not say anything on the distribution of rainfall in the country. This is probably more important for the farmers as a normal monsoon in the last few years has also been associated with near droughts like conditions in certain internal parts of the country like Maharashtra, Karnataka, Andhra Pradesh and Telangana. This is so as these regions are already in the rain shadow area where the rain winds tend to be weak.
Any delay in arrival or weakness in overall rainfall can have a serious impact here. Also, typically these areas are dependent on the monsoon as interior India has less access to irrigation facilities which are stronger in the northern belt of Punjab-Haryana-UP-Bihar. Therefore, the interspatial distribution becomes important.
2019 would be a significant year for the monsoon because there have been good seasons in the last few years statistically and hence there is always a fear that this year could be adverse as rarely have there been such successive normal monsoons. This becomes crucial from the point of view of agricultural production. Nearly 50 percent of the crop production takes place in the kharif season which includes rice, maize, soybean, pulses like tur and urad, cotton, jute and sugarcane.
With the farm sector being under considerable strain last year on account of abundant production leading to prices coming down, this season will be monitored closely by the government. Farmers have been switching crops based on prices received in the previous season which has caused considerable changes in cowing patterns in some regions.
The IMD's forecast also does not talk about the progress or withdrawal of the rains which is also important from the point of view of crop outcome. Heavy rains in the middle of the season can impact certain crops like oilseeds or cotton while weak monsoon during this period can affect rice which requires abundant water during the flowering season. Similarly, at the time of harvest, monsoon conditions need to be favourable. A prolonged monsoon had affected the pulses crop in the past too. Therefore, news of a normal monsoon should be viewed within this overall framework.
Monsoon forecasts in India have become important because of the erratic nature of the rains. Presently the reservoir levels are very low in the interiors which are a concern as it affects not just the crops but also basic living as access to drinking water is limited. The Skymet forecast did strike a slight note of panic as 93 percent of normal could be serious for the country especially those cropping regions that are rain-dependent which is nearly 60-70 percent of the kharif crop.
Inflation has by and large been under control so far this year due to benign food prices especially of vegetables, pulses and sugar. Output has been good too in most of the major crops leading to lower farmer prices creating a different kind of problem for the government. Rural demand has been low in 2018 on this score. It is, hence, even more, important from the point of view of rural incomes that the monsoon is good as it is a necessary condition for the fructification of the crop, though several qualifications need to also be satisfied.
(The writer is chief economist, CARE Ratings)