By Yuvika Singhal, Vivek Kumar and Shubhada Rao
India has received 99% of its monsoon rainfall this year, starting with mid-July. September rainfall, at 223 mm has been the second-highest since 1993 when it got 239 mm, 40% above normal. September figure ensured close to normal rainfall across India, with an average of 87 cm.
India’s Southwest monsoon on a cumulative basis ended the season almost at par with LPA (Long Period Average), only 1% lower aided by a stellar backloaded catch-up of rainfall in Sep-21. The deficit that was ruling at as high as 10% in the last week of Aug-21 was bridged by excessive rainfall in the last month of the season. Standalone, Sep-21 recorded 34.9% excess rainfall, more than compensating the 24.1% shortfall in Aug-21 vs. LPA.
Intense rains have been aided by formations of cyclonic circulations, deep depression and cyclones in the second half of Sep-21. Overall, the season’s outcome was in line with IMD’s (India Meteorological Department) forecast released at the start of the season which had forecasted 2021 rainfall to most likely be ‘normal’ at 101% of LPA with a model error of +/-4%.
• For the season as a whole, spatially East-NE region ended with a maximum shortfall of 12% followed by Northwest at 4%. In comparison, Central and South India ended in a surplus rainfall of 4% and 11% respectively.
• Of the 36 sub-divisions, 30 received normal to excess rainfall (i.e., 82% of the total area of the country), with 6 sub-divisions (of which 3 in NE) receiving deficient rainfall.
Sowing ends on a strong note
The rainfall deficit over Jul-Aug-21 notwithstanding, area sown under Kharif crops as of 24th Sep-21 stood at 1115.27 lakh hectares, i.e., only 0.5% below last year’s level. In fact, compared to normal historical area sown, 2021 level stands at nearly 104%. On a crop-wise basis, contraction in area sown under cotton at 6.1%YoY was the biggest laggard while most other crops (by broad groups) registered small changes versus last year (see Table1).
Looking at an alternate measure, i.e., rainfall weighted by foodgrain production at the state level (i.e., for key agriculture-heavy states) indicates that monsoon has fared better throughout the season than the traditional area-weighted metric. Production weighed rainfall index has in fact ended the season in a mild surplus of+3%.
This is reflected in better sowing and also in the estimated increase in foodgrain production as per the first advance estimate for 2021-22 pegged at 150.5 mn tonnes i.e., 0.5% higher vis-à-vis fourth advance estimate of 2020-21 which was at an all-time record high. However, there are preliminary reports of crop losses owing to excess moisture due to Sep-21 rains from some parts of the country, which may weigh on the final output marginally.
Rabi sowing: Reservoir status and late withdrawal to aid
From the perspective of Rabi sowing, two factors remain supportive
• One, adequate level of water in reservoirs. As per the Central Water Commission, as of 30th Sep-21, the total current capacity as a % of the total live capacity of all reservoirs combined stood at 80.4% and as % of last year’s level at 93.3%.
• Two, late withdrawal of monsoon. Typically, Southwest monsoon starts to withdraw by mid-Sep-21. This year, however, IMD expects it to begin withdrawing from around 6th Oct-21. This is likely to keep soil moisture intact for Rabi sowing.
Table1: Sowing progress of Kharif crops (as of 24th Sep-21)
|Crops||Area sowed (Lakh Ha) – 2020||Area sowed (Lakh Ha) – 2021||% change (vs 2020)|
|Total coarse cereals||180.2||175.7||-2.5|
|Total jute and Mesta||127.9||120.1||1.0|
Overall, the late monsoon revival in Sep-21 has turned out to be a saving grace for the season. More importantly, sowing which withstood monsoon vagaries has ensured that the outlook for Kharif output and FY22 agriculture growth remains positive.
This will prove critical to support the turnaround in rural demand post the second wave of infections; along with the increase in MSPs, Government procurement of key crops and fiscal support measures already in place. As such, we maintain our above-consensus FY22 GDP growth forecast call of 10.0%, albeit with mild downside risk.
From an inflation perspective, we expect the broad comfort on food inflation to continue into H2 FY22, with the Kharif harvest coming on board (QuantEco FY22 average CPI forecast at 5.6%). While rainfall is definitely one of the variables that impact food prices, but it’s not the only one.
Statistically, we find evidence of a weak correlation between Southwest monsoon performance and CPI food inflation historically, which can be explained by the impact of other exogenous factors on food inflation. This year, the Government’s cutback on import duties on oilseeds and pulses along with possible management of food supplies especially cereals, are likely to offer a reprieve.
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(Yuvika Singhal is an economist at QuantEco Research. Vivek Kumar is an economist at QuantEco Research. Shubhada Rao is the founder of QuantEco Research.)
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