India Insight:Slow start to the monsoon season

Spatial and temporal distribution of rainfall remains weak: On a spatialbasis (distribution of rainfall across states), while South Peninsula (15%above normal) and Northwest India (3% above normal) received reasonablerains, other regions, including Central India (37% below normal) andNortheast India (25% below normal), continued to receive below-normalrainfall during the period June 1–22. Similarly, on a temporal basis(distribution of rainfall over the four months) the rainfall trend was belownormal in all the weeks since the start of the monsoon season.

Area under cultivation for summer crop down 24%YoY up to June 24 butwill normalise as rainfall trend improves: Crop sowing for summer crop(kharif), which accounts for nearly-50% of total agriculture production,remained weak, declining 24%YoY as of June 24 (vs a decline of 10% in theprevious week), mainly led by oil seeds, cotton and pulses. The decline inarea sown is largely due to the late arrival of the monsoon rains resulting infarmers postponing sowing of summer crop. We think it is too early in theseason to form a view, and the likely impact of monsoons on cropproduction will realistically be known only by end-July, when the bulk ofthe crop sowing gets done.

Water level in reservoirs is low: According to the Central WaterCommission, the total live storage in 91 key reservoirs stood at 15% of thestorage capacity as of June 23. This is much below last year's storage of 27%as well as the last ten years’ average of 20%, mainly due to poor rainfall in2015. We believe the water level in reservoirs is important to track (a) to meetthe needs of irrigation for both the summer crop in the case of deficient rainsand also the winter (rabi) crop and (b) to help generate power, as many ofthese reservoirs are linked with hydropower project plants. An early andadequate rainfall during this season will help lower the importance of reservoirlevels on crop sowing.