India's Agriculture Outlook Worrisome After June Monsoon Disappointment

Despite a forecast of an above-normal south-west monsoon for the season, deficient rainfall in June, along with stark regional disparity, means a wait-and-watch mode for the impact on agriculture should these trends persist.

The India Meteorological Department, which forecasts above-normal rainfall for this monsoon season, has downgraded its June forecast from 'normal' to 'below-normal' rainfall due to a pause in monsoon coverage. Cumulative rainfall up until June 26 remains 19% below the long-term average, while the weekly rainfall as of June 26 was also 19% below the long-term average. Spatial divergence remains high but has seen a decline from a week ago. Rainfall is deficient in the north-west by 51% and in central India by 24%, whereas the southern peninsula has so far clocked a surplus of 13%.

The monsoon was stagnant for about a week without any progress until June 19, after which it advanced into more parts across the country, said the IMD. Conditions are likely to become favourable for the further advance of the Southwest Monsoon, with no heatwave conditions across the country.

Stalled rainfall across the majority of the country has led to a delay in Kharif sowing, said Madhavi Arora, lead economist at Emkay. A significant delay in Kharif sowing will impact food output and the Rabi sowing season, as farmers will have less time to prepare their fields after the Kharif harvest, Arora said.

However, Shreya Sodhani, vice president for global research at Barclays, said that it is still early in the season. Crop sowing is usually done between July and August, which normally receive the maximum rains in the season. 

Due to the heatwave, production of potatoes, onions, and tomatoes—key perishables—has been impacted, which is also reflected in lower mandi arrivals, said Aditi Gupta and Dipanwita Mazumdar, economists at Bank of Baroda. "As a result, prices of these commodities have seen a significant uptick, which is expected to keep food inflation elevated in the near term," they said.

Vegetable prices may decline from August if the monsoon picks up, said Emkay's Arora. However, the prices of milk and pulses will stay high due to tight supplies. Cereals could also see elevated prices, with the government announcing a 5.4% increase in MSP for paddy for the current Kharif marketing season, she said.