India Insight:Favourable monsoons to boost growth

Monsoons in ‘normal’ range: The overall country-wide data as released bythe India Meteorological Department (IMD) indicates that the cumulativerainfall was 3% below normal up to Sept 25th. The rainfall trend during 2016monsoon season remains reasonable and is within the normal range of+/- 4%. However, it is below the IMD’s forecast of above normal rainfall of106% at the start of the season.

First advance estimate of summer crop indicates food grain productionwas up 9% YoY this season: This compares with +3% YoY and -7% YoYregistered in the previous 2years based on first advance estimate. This is thehighest growth on YoY basis seen in food grain output since FY11. Looking atthe data, it seems that farmers have shifted from other crops like cotton andsugarcane towards pulses to take advantage of higher MSPs. Alsoconsidering the withdrawal of monsoons in India has got delayed by 2weeks,the incremental rainfall is helping improve the yields of the standing crop.

Good monsoons will help improve crop production and boost farmincome: The summer (kharif) crop production (that accounts for nearly 50%of total agriculture production and 5% share in GDP) is largely dependent onthe rainfall the country receives during the monsoon season given limitedirrigation facilities. The favourable momentum in rains will help brighten theprospects for agricultural growth this year (estimated at 3.7%YoY in FY17) vs.an average of 0.5% YoY registered in the previous 2years on deficient rains.It will also improve the prospects for winter (rabi) crop production (accountingfor the remaining half) which is dependent on soil moisture content and thewater level in reservoirs. Good monsoons will also help boost farm incomeswhich will help support rural demand and hence overall consumption.