Monsoon and Food Inflation: Uncertain Prospects for India's Agricultural Sector

A surge in Kharif crop plantings brings hope, but strengthening El Niño raises concerns for the monsoon & rabi crop. Low rice & wheat stocks add to food inflation worries. Dairy & edible oil sectors show positive signs.

Srajan Girdonia
New Update
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India's southwest monsoon experienced a turnaround in July, bringing relief to the agricultural sector after a delayed start in June. However, concerns loom over the potential impact of a strengthening El Niño on the monsoon, which could extend to the rabi crop. The recent surge in Kharif crop plantings, including rice, has been positive, but uncertainties persist due to the El Niño forecast. This article explores the implications of the monsoon's performance, the potential consequences of El Niño, and its impact on various crops, food inflation, and overall agricultural prospects in India.

Monsoon's Recovery and Impact on Sowing

The southwest monsoon arrived seven days late on June 8 and experienced a 52.6% deficiency in rainfall during the first two weeks, with a cumulative deficiency of 10.1% by the end of June. However, from the last week of June, the monsoon staged a recovery, covering the entire country by July 2—six days ahead of schedule. The month of July recorded 15.7% above normal rainfall, benefiting most major agricultural regions, except for eastern Uttar Pradesh, Bihar, Jharkhand, and West Bengal.

The monsoon's turnaround has led to a significant increase in Kharif crop plantings, including rice, which had been lagging behind last year's levels until mid-July. The bulk of kharif sowings occur from mid-June to mid-August, and the rainfall during this period determines the area covered. For now, both the monsoon and kharif sowings have been favourable.

El Niño Caution and Implications

The potential threat to India's agricultural sector comes from El Niño, an abnormal warming of the central and eastern Pacific Ocean waters known to suppress rainfall in India. Global weather agencies forecast the persistence and strengthening of El Niño through the 2023-24 winter, raising concerns about the monsoon entering a weak phase in August. If rainfall activity weakens further, it could impact the rabi season, especially crops dependent on stored rainwater.

The implications of El Niño are already visible in the low stocks of rice and wheat in government godowns, which were the lowest in five years as of July 1. Delayed and inadequate rainfall has affected rice acreage, with farmers planting shorter-duration varieties that yield less. Similar challenges are faced by Punjab and Haryana farmers, who have had to re-transplant paddy in areas affected by excess rain and water released from dams in Himachal Pradesh. The possibility of El Niño's impact on cane for sugar production also raises concerns.

Other Crops: Pulses, Edible Oil, Milk, and Vegetables

Among pulses, arhar (pigeon-pea) and urad (black gram) have experienced a decline in acreage due to rain-deficient regions during the sowing window. However, the good rain in Rajasthan is expected to yield a bumper crop of moong (green gram), and ample chana (chick-pea) stocks and imports of masoor (red lentil) should keep a lid on pulses prices. Edible oil inflation is likely to remain low due to projected high imports.

The dairy sector shows positive signs, with increased milk production expected as buffalo calvings begin in August. This should ease the recent shortage of milk, which caused a surge in prices earlier this year. Improved fodder availability and high milk prices have triggered a favourable response from farmers. Similarly, in the vegetable sector, despite high retail prices, the faster supply response is expected to bring inflation down as easily as it rose.

The recovery of the monsoon has positively impacted kharif crop plantings in India, including rice. However, the threat of El Niño looms large, potentially impacting the rabi crop and leading to food inflation. The government is closely monitoring the situation, having already imposed export bans on wheat, non-parboiled non-basmati rice, and sugar. Despite the challenges, the supply response from farmers and favorable conditions in some crops offer hope for mitigating the impact of the monsoon and El Niño on India's agricultural sector.