India Insight:Rainfall trend weakens after a strong start

Event.

Cumulative rainfall 2% below normal up to July 12th: The overallcountrywide data released by the India Meteorological Department (IMD)indicates that cumulative rainfall was 2% below normal up to July 12th (vs.

13% above normal up to July 1st). On a weekly basis, the rainfall trendworsened to 51% below normal for the week ending July 8th (vs 14% belownormal for the previous week). However, the trend has improved over the pastcouple of days, with good rainfall registered in many states of north Indiaincluding Haryana, Punjab, etc. The crop sowing for summer crop alsocontinued to pick up by 62% YoY during the week ended July 10th (vs 58%YoY in the previous week) partly helped by a low-base effect.

Tracking rainfall trend in July is critical: Even as the start of the monsoonseason was quite good, the month of June only accounts for ~19% of totalrainfall. We believe the rainfall trend during July (which accounts for one-thirdof total monsoon rainfall) is critical considering bulk of the crop sowing (~70%)gets completed by the end of this month and will have implications on overallcrop production as well as food inflation concerns.

What is in the details? Spatial distribution of rainfall deteriorates; temporal distribution ofrainfall remains mixed: On a spatial basis (distribution of rainfall acrossstates), except for Northwest India which is also largely irrigated (rainfall 9%above normal), all other regions – Central India (8% below normal), SouthPeninsula (7% below normal) and Northeast India (4% below normal)continued to receive below normal rainfall during the period June 1st to July8th. On a temporal basis (distribution of rainfall over the four months) therainfall trend was below normal in the past three out of six weeks and nearand above normal in the rest since the start of the monsoon season.

Area under cultivation for summer crop up 62%YoY up to July 10: Cropsowing for summer crop (kharif), which accounts for nearly 50% of totalagriculture production, grew 62% YoY as of July 10th. It has continued toimprove compared to a growth of 58% YoY registered during last week. Thissharp growth was also led by a low-base effect due to delayed crop sowingduring the same period last year. The increase in area sown up to July 10thover last year was largely led by oil seeds, coarse cereals, cotton and pulses.

However, a decline was seen in the area sown for paddy (rice) during thisweek. Considering only ~40% of the crop sowing has got done till date, thelikely impact of monsoons on crop production will realistically be known onlyby end-July, when the bulk of the crop sowing (~70%) gets completed.

Water level in reservoirs at comfortable levels: According to the CentralWater Commission, the total live storage in 91 key reservoirs stood at 31% ofthe storage capacity as of July 9th. This is above last year's storage of 24%and the last 10 years’ average of 26%. This is important to: (a) meet theneeds of irrigation for both the summer crop in the case of deficient rains andalso the winter (rabi) crop; and (b) help generate power, as many of thesereservoirs are linked with hydropower project plants.