Amidst a scorching heatwave in parts of India and landslides and floods in others, the south-west monsoon marked an early entry on Thursday, two days ahead of schedule. The monsoon has set in over southern India and has already advanced into most parts of northeastern India, the India Meteorological Department (IMD) said in a statement Thursday afternoon. Widespread rains over the past few days in these states preceded the monsoon’s entry.
The four-month-long monsoon season, beginning in June, is a lifeline for much of the country, particularly for rural areas dependent on farming. It brings in three-quarters of India’s annual rainfall, watering crops, filling up reservoirs, and boosting farm incomes and consumer demand.
‘The monsoon is never a straight story, and its distribution over time and geographies will be key,’ said Dharmakirti Joshi, chief economist at CRISIL. ‘The good news is that rains are forecast to be above normal,’ said Joshi. ‘Farm and wage incomes are likely to improve. A good harvest will cool food prices, particularly cereals like rice and some varieties of pulses.’ Food inflation has been hovering at over 8% for the past six months.
Typically, after entering Kerala and touching the northeast, the monsoon gradually progresses through the country, reaching the northernmost parts between end-June and early July. The IMD has forecast above-normal rains at 106% of the 50-year or long-period average (LPA) this year. Rains are likely to be above normal in most rain-fed farming areas, the weather office said earlier this week in an updated forecast. It attributed a 61% probability to above-normal (105-110% of LPA) and excess rains (over 110% of LPA), which raise the risk of possible floods in some parts of the country.
The monsoon is critical for India’s vast farm economy, which employs over 45% of its workforce and contributes about 15% to its gross domestic product (GDP). Uneven rains were a reason why the farm sector growth rate plummeted to a low of 0.7% in 2023-24, compared to 4.7% in the previous year. Rural markets have been weak for the past six quarters for the industry, said Anuj Poddar, managing director and chief executive, Bajaj Electricals Ltd. ‘Coming on the back of an intense summer, a favorable monsoon will imply a strong second half of the year vis-a-vis demand. The outlook will be much better than last year,’ he said.
Combating food inflation, with non-food inflation already being low, can provide policy room for interest rate cuts, Crisil Research said in a note Thursday. It added that above-normal temperatures predicted in June, when planting for the crop season begins, could impact the availability of labor or the ability to work under extreme conditions. High temperatures can also deplete reservoir levels, which are already 24% below capacity.
