India's Monsoon Rains Expected to be Near Normal
Date: 20-Apr-07
Country: INDIA
Author: Hari Ramachandran and Mayank Bhardwaj
The annual June-September monsoon is vital to the economic health of the US$885 billion economy because it provides the main source of water for agriculture, which generates more than a fifth of the country's gross domestic product.
Farming and related activity provide a livelihood to more than two-thirds of India's 1.1 billion people, and good rains usually spur rural spending on a wide range of industrial products from soap to motorcycles.
Bountiful rain helped the economy to expand at an average of over 8.5 percent over the past three years -- behind only China among major economies.
The India Meteorological Department said it expected rains this year at 95 percent of the long-term average with an error margin of 5 percent, based on a new statistical model to forecast rainfall.
SEEN LOWER THAN 2006
M. Rajeevan, a senior weather department official, told reporters rains were expected to be close to normal but lower than the total volume of rainfall received in 2006.
The rainfall in 2006 was 100 percent of the long period average, higher than 93 percent it forecast in April last year.
"It is near normal, but much depends on the distribution as the monsoon extends for four months," said a Mumbai-based commodity analyst. "The timely onset of the monsoon and its progress across the regions should boost farmers' confidence."
India had to order massive imports of wheat and pulses last year because rains were either late or caused floods in some regions, sending prices of food items sharply higher.
This pushed annual inflation to a two-year high at 6.7 percent in early 2007, forcing the central bank to raise interest rates and tighten money supply.
The weather department will give its forecast of the onset of rains over the southern Kerala coast in May and a seasonal forecast in June.
Farm Secretary P.K. Mishra said the forecast was not a cause for concern as taking into account a 5 percent margin, rains could turn out to be more than average.
Traders said good monsoon would boost rice, oilseeds, cotton, pulses and coarse grains crops as these were rain-dependent.
Most analysts said the forecast would be good for the economy provided the distribution of rains was even over the country.
"It is still early days yet. However, 95 percent of long-period average is a good enough outcome for the economy, assuming that the spatial and temporal distributions are along expected lines," said A. Prasanna, analyst with ICICI Securities.
The forecast implied that rains would be more or less normal, said Arun Kejriwal, strategist with KRIS Research.
"But it is too early to say as we are in the middle of April and the monsoon hits the Kerala coast by end of May," he said.
Most of India's farms are dependent on rain in the absence of modern irrigation facilities. The monsoons begin around June 1 in Kerala before spreading across the vast South Asian country over a four-month period.
In 2002, a drought hit many parts of the country, lowering agricultural production, while India witnessed the best monsoon in more than a decade in 2003, helping the country to reap bumper grain and oilseed harvests and lifting economic growth.
