Improved sowing and rising reservoir levels could cushion the impact of below-normal rainfall, but strengthening El Nino remains a key risk to the monsoon outlook.
India’s current monsoon rainfall deficit may have a limited impact on kharif crop output as the sowing season is largely over and rainfall improved in July, according to an ICICI Bank report.
The report said the impact of the rainfall shortfall could be less severe than previously anticipated because of the pickup in rainfall during July and improved sowing activity.
Cumulative rainfall up to August 24 stood at 564 mm, 13 per cent below the long-period average (LPA). Rainfall during August 1-24 was 15 per cent below the LPA.
The rainfall deficit, however, remains uneven across regions. East India recorded a 27 per cent shortfall, followed by South India at 22 per cent. Northwest India reported an 11 per cent deficit, while Central India saw a relatively smaller shortfall of 2 per cent.
Around 67 per cent of cultivated areas or states have received normal rainfall. However, Bihar, Andhra Pradesh, Punjab, Karnataka and Rajasthan have recorded deficient rainfall.
Sowing improves as season progresses
Kharif sowing stood at 105.7 million hectares as of August 17, down 1.5 per cent from 107.3 million hectares a year earlier.
Rice acreage, the largest kharif crop, declined 3.2 per cent year-on-year to 40.5 million hectares. Sowing of coarse cereals and oilseeds also remained lower than last year.
At the same time, pulses acreage increased 1.3 per cent to 11.4 million hectares, while the area under jute and mesta rose 1.8 per cent.
More from BusinessThe report noted that sowing activity has improved, with the gap in rice acreage narrowing, offering some support to the overall kharif outlook.
Reservoir levels offer some cushion
Improving reservoir storage could also help offset the impact of below-normal rainfall.
Live storage across 150 reservoirs stood at 117.3 billion cubic metres as of August 20, equivalent to 64.3 per cent of total capacity. Although storage remained below last year’s level, ICICI Bank said improving water availability could provide some cushion against weaker rainfall.
Reservoir levels were relatively higher in Western, Central and Eastern India.
El Nino remains key risk
Despite the improving crop outlook, weather risks remain elevated. El Nino conditions have strengthened, with the Nino 3.4 index rising to 2.37.
According to the report, the development poses an elevated risk to monsoon rainfall and could remain a key downside risk for agricultural output if rainfall weakens further.
ICICI Bank expects cereal prices to remain relatively stable, supported by surplus government stocks. However, higher sugar and onion prices have changed the recent food-price outlook.
