India Monsoon: Nationwide Monsoon Deficiency Falls But Key States Remain Dry

India's southwest monsoon recovered in the past week with the cumulative deficiency narrowing to 3 percent of the long-period average, compared to a 9 percent deficiency earlier in the month. While the nationwide averages improved, certain key states continue to see a shortfall in seasonal rainfall.

India Meteorological Department data, as of July 25, shows that rainfall in states including Bihar, Maharashtra, Telegana and Andhra Pradesh remains deficient. The northeastern states have also seen lower-than-normal rain.

“Rainfall over the next few days will improve the situation over Uttar Pradesh, Bihar, Jharkhand and the Northeast which have been seeing a shortfall,” IMD's Director DS Pai told BloombergQuint.

Some states which were seeing a deficiency till mid-July have seen a normalisation of conditions in the last couple of weeks, noted Axis Capital in a report published on Wednesday. But the rainfall pattern in rice-growing states remains a concern.

Rains lashed most parts of the country over the last week with weekly precipitation at 20 percent over the long-period average for the country as a whole, the report said.

A pick-up in rainfall could help push up sowing, which remains below last year's levels. As of July 6, sowing in Kharif season was 14 percent lower than last year due to the slow advancement of the southwest monsoon, said Axis Capital.

Should rains accelerate, sowing activity could recover, said Radhika Rao, economist at DBS in a report on Tuesday. “With rains playing catch-up in the central and north west region in recent days, we expect sowing activity to be revived in these areas accordingly.”

DBS added that reservoir levels, used for farm irrigation, also improved after the latest bout of rains. As of July 19, reservoir levels had improved to 32 percent of capacity compared to 18 percent at the end of June, showed data collated by DBS.

Effect On GDP And Inflation

A normal monsoon is important for both inflation and growth in the economy.

If the improvement in farm production restores India's agricultural gross domestic product growth to 6 percent from a moderated 3.4 percent last financial year, it could add 30 basis points to India's overall GDP, Rao said.

The Indian economy is expected to grow 7.4 percent in 2018-19.

The effect on inflation, on the other hand, will be mixed. While better rainfall will help contain inflationary expectation, “the impact of a good monsoon on headline inflation is less direct as past episodes of a strong monsoon do not necessarily show low inflation,” according to Rao's report.

Still, inflation in the fruits and vegetables category, which account for 53 percent of food inflation, could ease on good rains in most parts of the country, said Axis Capital.