India's monsoon situation has improved significantly in recent months, reducing concerns over widespread disruption to the Kharif crop, according to a report by Macquarie.
The brokerage said the situation is “recovering, albeit not fully recovered”, with rainfall distribution remaining a key factor to watch.
The cumulative rainfall deficit narrowed sharply from 35% on June 16 to 12.6% by August 19. The improvement has also been reflected in Kharif sowing, which has recovered considerably after a weak start to the season.
As of August 14, total Kharif sowing was only 2% below last year, after a 21% shortfall in late June. Rice acreage was 3.7% below last year, while maize acreage was down 4%. In contrast, pulses, oilseeds, sugarcane and cotton acreage were all within around 1% of year-ago levels.
Macquarie noted that the remaining weakness is largely concentrated in a few crops rather than being broad-based.
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The brokerage also highlighted healthy reservoir levels as an important buffer against the rainfall deficit. Reservoir storage remains at or above the 10-year average in Maharashtra and Gujarat, while key agricultural states such as Uttar Pradesh, Madhya Pradesh and Punjab have storage levels at around 80-100% of their respective averages.
However, Macquarie cautioned that some regions, including Bihar and parts of southern India, warrant close monitoring.
The improving monsoon, limited shortfall in overall sowing and adequate irrigation reserves have collectively reduced downside risks to Kharif output, according to the brokerage.
The development is also positive from an inflation perspective. Macquarie said food-supply and inflation risks have moderated from June levels. However, the remaining rainfall deficit means crop yields will still depend on the distribution of rainfall during the late part of the monsoon season.
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