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Normal Monsoon in India May Spur Growth of Virus-Hit Economy

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Pratik Parija and Vrishti Beniwal
·4-min read
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(Bloomberg) -- India’s monsoon, which irrigates more than half of the country’s farmland and is critical for economic growth, is set to be normal for a third year as some external weather patterns like El Nino are likely to be absent.

Total rainfall during the June-September rainy period is likely to be 98% of a long-term average, Madhavan Nair Rajeevan, secretary of the Ministry of Earth Sciences, said at an online conference on Friday. The forecast has a margin of error of 5%.

Most parts of the country, except some areas in the east and the north, will likely receive normal to above-normal rain during the four-month period, according to the India Meteorological Department. The odds of a normal monsoon stand at 40%, while there is a 16% chance of above-normal rains, it added. The likelihood of below-normal showers is 25%, the weather bureau said.

The monsoon is crucial for India as about 60% of more than 1.3 billion people depend directly or indirectly on agriculture, which accounts for about 18% of its economy. Normal rains would help support an economic recovery, which is facing new risks from a resurgence in virus cases. India reported more than 200,000 new Covid-19 infections on Thursday, its highest one-day surge since the pandemic broke out.

“Amidst the heightened uncertainty related to the second wave of Covid-19 in India, the India Meteorological Department’s forecast of a likely normal monsoon for the third year in a row couldn’t have come at a better time,” said Kaushik Das, chief India economist at Deutsche Bank AG in Mumbai.

“A probable normal monsoon will help the farm sector to grow at least by 3% this year, as per our current forecast, and will also reduce potential risks on the inflation front, that is generally associated with erratic monsoon,” Das said.

Rains during the four-month period not only water some fields directly, but fill reservoirs that help irrigate winter-sown crops. A good monsoon boosts crop output, while deficient rains lead to drinking water shortages, lower crop output and higher imports of some commodities. The nation is the world’s top grower of cotton, the second-biggest producer of wheat, rice and sugar, and the largest buyer of palm oil.

About 60% to 90% of total annual rainfall occurs during the season over different states. A monsoon is considered normal when rains are recorded between 96% and 104% of the 50-year average.

June Arrival

The monsoon typically reaches the southern Indian state of Kerala in the first week of June, before moving north to cover most of the nation. Any delay or deficit in the early part of the season could hamper sowing and hurt crops such as rice, cotton and soybeans, even if the rainfall gathers pace later.

Last year’s monsoon rain was 9% higher than normal, while it was 10% more than the long-term average in 2019. Bountiful rains helped crops and boosted India’s food grain output to a record in 2020-21.

Agriculture was the only bright spot when the economy saw a record slump last year as manufacturing and services were badly hit following a nationwide lockdown due to the rapid spread of the coronavirus.

Rains are also crucial for the nation’s inflation-targeting central bank to determine monetary policy. Wholesale as well as retail price inflation quickened in March, reflecting upward pressure from higher commodity prices and firmer input costs.

“Going forward, the food inflation trajectory will critically depend on the temporal and spatial progress of the southwest monsoon in its 2021 season,” Reserve Bank of India Governor Shaktikanta Das said earlier this month, as the central bank left interest rates unchanged.

The meteorological department said that neutral ENSO conditions -- the absence of El Nino or La Nina weather patterns -- are prevailing over the Pacific Ocean, supporting its forecast of a normal monsoon this year. “There is very less chance of El Nino development during the monsoon season.”

(Updates to add details in third and 14th paragraphs)

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