India's monsoon and impact on economy

NEW DELHI Sun Apr 22, 2012 5:20pm IST

A man holding an umbrella watches large waves on the Marina beach as a cargo ship passes in Tamil Nadu December 30, 2011. REUTERS/Babu/Files

A man holding an umbrella watches large waves on the Marina beach as a cargo ship passes in Tamil Nadu December 30, 2011.

Credit: Reuters/Babu/Files

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NEW DELHI (Reuters) - India's monsoon rains are likely to be within long-term averages in 2012, the weather office head said on Monday, reassuring farmers ahead of next week's official forecast from New Delhi.

Global weather experts will gather in Pune on Thursday to assess the outlook for the overall south Asian monsoon at a meeting seen as a precursor to the official India prediction.

The June to September rains are crucial for India with 60 percent of its arable land dependent on them.

With the end of the La Nina weather pattern, associated with heavy rains in south Asia, and its opposite El Nino unlikely to start until August when much sowing is completed, neutral conditions are seen in India for the crucial first half of the season, a weather expert said on Wednesday.

"Normal rains are likely this year as the La Nina ended and has entered a neutral phase which is expected to continue till August," said D. R. Sikka, former director of the Pune-based Indian Institute of Tropical Meteorology.

India has had two consecutive years of monsoon rainfall within long-term averages after 2009's worst drought since 1972.

CLASSIFICATION

A normal or average monsoon means rainfall between 96-104 percent of a 50-year average of 89 centimetres in total during a four-month season from June, according to the India's weather office classification.

In 2011, the monsoon rains were 101 percent of the long period average.

Rainfall below 90 percent of the average is considered as a drought. T he last time there was a drought with rains below this range was 2009 and before that, in 2004.

Rainfall above 110 percent of the average would mean an excessive monsoon -- not as damaging as drought but potentially hurting yields of sugar cane.

ARRIVAL

The monsoon season starts with the arrival on the Kerala coast on about June 1 and covers the whole country by mid-July. Its progress triggers planting of summer crops.

PROGRESS

After hitting the Kerala coast, it takes about a week to cover the coffee, tea and rubber growing areas of south India.

It spreads to the rice areas of eastern parts in the first 10 days. It usually covers half of the country in the first fortnight and enters the oilseed-producing areas of central India in the third week of June. Cotton-growing areas in the western region get rains by the first week of July.

Half of India's farm output comes from crops planted during the first half of the June-September season.

The quantum of summer rains also influences winter food crops such as wheat and rapeseed which are grown in irrigated areas which use water in reservoirs dependent on monsoon rains.

Distribution of the rains across key arable regions is also a major factor in farm production.

Here are some facts on the monsoon and its impact:

CROPS

RICE -- Farmers sow paddy at the start of the monsoon season in June and the key areas are in eastern and southern regions. The crop is heavily dependent on rains for irrigation.

A bumper harvest last year led the government to lift a four year ban on exports and rainfall within averages will erase any chance of a return of the export ban for the world's second largest producer of the grain after China.

India is likely to emerge as the world's second largest rice exporter in 2012, selling around 7 million tonnes, while Pakistan's shipments are expected to bounce back to about 4 million tonnes amid the high prices of rival Thailand, the world's biggest exporter.

India produced 103 million tonnes of rice in the crop year to June 2012, according to the farm ministry, while it consumes around 90 million tonnes of rice annually.

SUGARCANE: An average monsoon will help the world's top sugar producer after Brazil to keep exports flowing for the new season from October 1. India has allowed 3 million tonnes of sugar for overseas sales in the 2011/12 season and could consider more.

India is expected to produce a total 26 million tonnes in 2011/12, higher than annual demand of about 22 million tonnes, with at least 25 million tonnes likely in 2012/13.

OTHERS: Corn, lentils, oilseeds and cotton -- important crops in western and central India -- have some dependency on the seasonal rains. India remains a net importer of lentils and cooking oils and domestic output can alter overseas purchases.

An average monsoon could also allow the world's second biggest producer of cotton to lift its current ban on exports after record overseas sales in 2011/12 on a bumper harvest.

ECONOMY AND MARKETS

-- The monsoon rains are vital for farm output and economic growth in India, the world's second-biggest producer of rice, wheat, sugar and cotton. Agriculture accounts for about 15 percent of India's nearly $2 trillion economy, Asia's third biggest.

-- India is largely self-sufficient in major foodgrains such as rice and wheat, but drought can send the country to global markets. In 2009, India had to import sugar, sending global prices to record highs and pushing up inflation.

-- If monsoon rains lift farm output, that can boost domestic demand as it raises incomes of rural people, who make up about two-thirds of India's population of 1.2 billion. The consequent higher demand for goods and services can boost economic growth.

-- Higher farm output would also rein in food prices and help the government to take steps to cut the fiscal deficit and farm subsidies. India's food inflation rose to 8.22 percent in March from 6.62 percent in February, latest figures show.

-- A stronger economic outlook can lift sentiment in equity markets, mainly of companies selling products in rural areas, including consumer goods and automobiles.

-- Monsoon rains impact demand for gold in India, the world's top consumer of the metal, as purchases get a boost when farming incomes rise amid high crop output. Rural demand is about 70 percent of India's annual gold consumption as bullion is a popular investment in areas where banks are scarce.

IRRIGATION, POWER

-- Monsoon rains replenish reservoirs and lift ground-water levels, allowing better irrigation and more hydropower output.

-- Higher rainfall levels can trim demand for subsidised diesel, which is used to pump water from wells for irrigation when rainfall is scant. Diesel accounts for about 40 percent of India's oil products demand.

GRAPHICS

India farm output vs monsoon rainfall, click link.reuters.com/tas67s

For a graphic on India monsoon - forecast vs actual, click link.reuters.com/xux88r

(Editing by Jo Winterbottom)

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