Rain god to help economy this Monsoon

Rain god to help economy this Monsoon

India is likely to get "normal" monsoon rains, according to the first official forecast of the season by the India Meteorological Department (IMD).

The IMD on Tuesday said there would be good distribution of rainfall across the country and it will receive 96 per cent of the long period average. "However, adequate rainfall in the second half of the season would remain important for yields", it said. Partly due to unfavourable rainfalls and reservoir levels, the GVA for crops contracted by 2.2 per cent in 2016, she pointed out. The contribution of agriculture to the gross domestic product (GDP) is around 18 percent.

"The impact of monsoon dynamics, as well as other inflation risks such as the goods and services tax, won't be clear for at least a few more months, which suggests a high likelihood of a prolonged pause for the policy rate. The RBI is likely to focus on liquidity management measures in the next few policies", he said in a statement.

"The monsoon forecast is reassuring given all southern states in India are seeing a water crisis". Last year's monsoon was above average in much of the country, bringing relief to millions of rural farmers reeling from two years of drought. "A good, well-distributed monsoon will keep food inflation risk on the lower side and give RBI the elbow room to ignite growth by keeping liquidity accommodative", said Rupa Rrege Nitsure, group chief economist at L&T Finance Holdings.

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Last year, all IMD forecasts, except the one for July for all of India, were overestimates when compared to actual rainfall values. In India, the growth forecast for 2017 has been trimmed by 0.4 percentage point to 7.2 percent, primarily because of the temporary negative consumption shock induced by cash shortages and payment disruptions from the recent currency exchange initiative. The department, which used a combination of statistical and ocean atmospheric models, said both showed rainfall this year would be normal.

As the extreme sea surface temperature conditions over the Pacific particularly El Nino conditions over the Pacific (El Nino or La Nina) and positive IOD development over the equatorial Indian Ocean are known to have strong influence on the Indian summer monsoon, IMD is carefully monitoring the sea surface conditions over the Pacific and Indian oceans. For the year ended March 2017, the agricultural sector is estimated to have grown 4.2%. Positive condition are likely to be favorable for normal or above-normal rain.

Japanese brokerage Nomura believes that risks are skewed toward below-normal rains despite the IMD's normal rainfall prediction.

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