Normal monsoon will boost agriculture

New Delhi: India Meteorological Department’s (IMD) prediction of a “normal” monsoon this year will boost agriculture growth and will soothe the nerves of investors and markets.

Earlier there were reports by private forecasters that monsoon this year may be below normal due to an evolving El Nino phenomenon.

A normal monsoon will help GDP growth and will also ease food inflation.

IMD forecast that monsoon seasonal rainfall is likely to be 96 per cent of the Long Period Average (LPA) with an error of 5 per cent. Monsoon rainfall between 96 per cent and 104 percent is considered normal and lower than 96 is categorised as “below normal”.

A normal monsoon is crucial for agriculture growth as India still to a large extent depend on rains and monsoon delivers 70 per cent of total rains received by the country in a year. “IMD prediction of a normal monsoon augurs well for agriculture. After two straight bad monsoons we had a good monsoon last year but the full benefit of it could not be realised in terms of demand for various goods and services due to demonetisation. In case we have a normal monsoon this year too then the pent-up demand plus rural demand will overall translate into better GDP growth in 2017-18,” said Sunil Kumar Sinha, principal economist, Ind-Ra.

Icra’s principal economist Aditi Nayar said that with expectation that monsoon rainfall would be around 96 per cent, agricultural growth could moderate from above 4 per cent in 2016-2017 to around 3.6 per cent in 2017-2018.

“Notwithstanding the modest contribution of agriculture to the overall GDP, the monsoon outlook would have some impact on consumption sentiment, both for consumer non-durables and big ticket items such as agri inputs, motorcycles and tractors among others,” she said.

According to other experts, any moderation in agriculture growth in case of normal monsoon this fiscal will be due to base effect as in 2016-17 India is likely to witness record food grain out.

“Even 3.6 per cent agriculture growth in current fiscal is credible over high growth seen last fiscal,” said experts.

Icra said that in addition to the overall level, the timing of rainfall would be crucial. “Higher rainfall in the early part of the monsoon may support sowing. However, adequate rainfall in the second half of the season would remain important for yields,” it said.

The agency warned that although reservoir storage exceeds the level in 2016, it may not prove adequate to shield the crop sector, if monsoon rainfall turns out to be appreciably weaker than the IMD’s initial forecast.