India Insight:Crop sowing progressing well,continuity of rainfall is critical

Event.

Cumulative rainfall 8% below normal up to July 19th: The overallcountrywide data released by the India Meteorological Department (IMD)indicates that cumulative rainfall was 8% below normal up to July 19th (vs. 4%below normal up to July 8th). On a weekly basis, the rainfall trend, whileremaining in deficit, improved to 14% below normal for the week ending July15th (vs. 51% below normal for the previous week).

Continuity of good rains over the coming weeks is critical to increasecrop sowing as well as to improve crop yields: We believe the rainfalltrend over the next 2-3 weeks is critical considering bulk of the crop sowing(about three-fourth) will get completed by then and will have implications onoverall crop production as well as food inflation concerns. Even as sowing forthe summer crop is progressing well (up 63% YoY during the week endedJuly 17th) partly helped by a low-base effect, we believe India needs continuityof a good rainfall trend over the coming weeks to improve crop yields. Theconscious policy efforts including seed subsidy and constant sharing ofscientific inputs based on amount as well as spatial distribution of rainfall havehelped in limiting the damage of poor rainfall.

Impact.

Spatial and temporal distribution of rainfall remains weak: On a spatialbasis (distribution of rainfall across states), except for Northwest India whichis also largely irrigated (rainfall 15% above normal), all other regions – CentralIndia (13% below normal), South Peninsula (12% below normal) andNortheast India (6% below normal) – continued to receive below normalrainfall from June 1st to July 15th. On a temporal basis (distribution of rainfallover the four months) the rainfall trend was below normal in the past four outof seven weeks since the start of the monsoon season.

Area under cultivation for summer crop up 63%YoY up to July 17th:Crop sowing for the summer crop (kharif), which accounts for nearly 50% oftotal agriculture production, grew 63% YoY as of July 17th. It has continued toimprove compared to +62% YoY registered last week. This sharp growth wasalso led by a low-base effect due to delayed crop sowing during the sameperiod last year. The increase in area sown up to July 17th over the last yearwas largely led by oil seeds, coarse cereals, cotton and pulses. The areasown for paddy (rice) also picked up by 4% YoY after declining last week.

Considering only ~50% of the crop sowing is done till date, the likely impact ofmonsoons on crop production will realistically be known only by end-July,when the bulk of 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 33% ofstorage capacity as of July 16th. This is above last year's storage of 25% andthe last 10 years’ average of 29%. This is important to: (a) meet the needs ofirrigation for both the summer crop in case of deficient rains and also thewinter (rabi) crop, and (b) help generate power, as many of these reservoirsare linked with hydropower project plants.