August rain key to rural economy recovery after erratic monsoon

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The monsoon shapes the livelihoods of millions of people and influences food prices.

Prime Minister Narendra Modi’s government is banking on a pickup in rural demand to slow the economy’s first contraction in four decades. But capricious rains can be a spoiler.

After an impressive start and good rains in June, the monsoon came to an end in July, a crucial month for the growth of seedlings of cereals and oilseeds such as rice, cotton and soybeans. Economists will be monitoring the rainfall regime closely in the coming weeks for clues about the future of the rural economy.

Agriculture has been the only bright spot in the country’s economic contraction, with the government and central bank betting on rural demand to spur growth after tractor sales picked up indicating a pickup in consumption. Any decline in the agricultural sector, which depends on monsoon rains to irrigate more than half of the fields, can hamper economic recovery.

“The spatial and geographic distribution is very important. When you look at some of these areas, the situation is slightly concerning,” said Devendra Kumar Pant, chief economist at India Ratings and Research, the local unit of Fitch Ratings Ltd. “We have to see if the gap will be covered or not.”

About a fifth of the country’s land area has received poor monsoon rains since June, about half have had normal showers, while the rest have experienced excessive showers. July, the wettest month, ended with a 10% deficit, potentially bad for crops.

Insufficient showers

Rains in the northwest region, including the states of Uttar Pradesh, Punjab and Haryana, have been 20% below normal so far this season, according to the Indian Meteorological Department. The central region received 7% less rain than normal, the eastern and northeastern belt saw 10% more than average showers, while the southern peninsula recorded 14% more than normal. India mainly grows rice, cotton, maize, sugarcane and oilseeds during the rainy season.

However, the opportune onset of the monsoon from June to September helped reservoirs accumulate more water. The weather bureau forecasts normal rains in August and September, but economists and farmers are closely monitoring the behavior of the monsoon across the country.

“We are closely monitoring three things – the spatial distribution of precipitation, the rate of planting and the levels of reservoirs,” said Rahul Bajoria, economist at Barclays Bank Plc. in Mumbai. “Places that don’t get a lot of rainfall are fed by canals. So we have to carefully monitor the levels of the water reservoirs, which are still quite good.” The rains this month will be critical as they will have a significant impact on agricultural production, he said.

The monsoon shapes the livelihoods of millions of people and influences food prices. Insufficient rains in the country, the second largest producer of rice and wheat, often lead to shortages of drinking water, reduced agricultural production and increased imports of basic products such as edible oils.

Dilip Patidar, who sowed soybeans, peanuts, black lentils and corn on 6 hectares (14.8 acres) of land in central Madhya Pradesh state, is desperately waiting for rains to save his crops.

“My crops are at risk due to lack of irrigation because we haven’t had good rains in the past 43 days,” Patidar said by phone. “Immediate rain is needed to save the drying crops.”

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