RPT-WRAPUP 3-India monsoon rains disappoint; situation 'grim'

(Repeats story issued late on Thursday)

* Heavy rains in parched soybean area, more rain likely

* Food prices up 10 pct annually

* Reservoirs see slight improvement

(Adds details, quotes)

By Ratnajyoti Dutta

NEW DELHI, Aug 13 (Reuters) - India's monsoon rains were 56 percent below normal over the past week, government data showed on Thursday, painting an increasingly grim picture for the farm sector and fuelling talk of a full-blown drought.

Since the start of the summer monsoon season on June 1, rains are 29 percent below normal, putting the winter planting season in danger, threatening to slow a burgeoning economic recovery and sending food prices 10 percent higher during the week ended Aug. 1 from a year earlier.

Poor rains, which occur every four to five years in India, also put increasing pressure on the government to act to minimise the economic and social impacts of weak farm output.

"It's almost given now that monsoon at least for the kharif (summer) production is very much a failure and we have reduced our growth projection to 5.5 percent from 6-6.5 percent," said Siddhartha Sanyal, economist at Edelweiss Capital in Mumbai.

The news was not uniformly bad, as rainfall improved in the central soybean-growing area and was forecast to be close to normal in the next few days.

However, sources in the India Meteorological Department said total rainfall in August would probably fall short of the reduced forecast of 90 percent of the average.

Water in India's main reservoirs rose slightly to 38 percent of capacity but remains well below the 10-year average of 45 percent in mid-August, and continued shortfalls could curb output of hydropower, which accounts for a quarter of India's already-strained electricity generation capacity.

Reservoirs also provide water to irrigate winter crops, which are endangered by low soil moisture needed for October sowing.

Weather officials said low rainfall so far, the worst in at least five years, would hit winter-sown crops such as rapeseed and wheat, while a trade body said edible oils imports by the world's top buyer would surge as rains will hit output of oilseeds, particularly groundnut. [ID:nDEB000871]

The weak monsoon has already damaged the cane crop, and prospects of big purchases by the world's top sugar consumer have helped push New York sugar prices to their highest level in nearly three decades.

The shortfall in monsoon rainfall was serious in Uttar Pradesh state, the biggest sugar grower, Farm Commissioner N.B. Singh said on Thursday, although he said the situation in most parts of the country was "not alarming".

A government source said Prime Minister Manmohan Singh was likely to meet chief ministers of state governments on Monday to discuss the situation.

DIFFICULT YEAR

Finance Secretary Ashok Chawla said on Thursday India's economy was on track to grow between 6.25 and 7.0 percent in 2009/10 but the monsoon deficit was a matter of concern. [ID:nBOM413302]

The economy grew 6.7 percent last year, and private economists say a bad monsoon could knock as much as 2 percentage points in the fiscal year that ends in March. Agriculture accounts for just 17 percent of the economy, but rural demand makes up more than half of domestic consumption.

"It's a matter of concern, we will respond to it," Chawla told reporters.

Ajit Tyagi, who heads India's weather office, called it "a difficult year", particularly in sugarcane areas in the northwest, soybean regions of central India and the rice- and corn growing Andhra Pradesh state.

India has grain stocks to last more than a year, and the government has said it would act against hoarding and speculation. Analysts said they are worried about rising inflation in the months ahead.

REPRIEVE FOR SOYBEANS

The key soybean crop, which had received virtually no rainfall in the past three weeks, got a boost on Wednesday, when rainfall was up to four times the normal level, and the weather office forecast heavy rains in the region in the next few days.

Annual monsoon rains in India, where farmers depend on the June-September showers to irrigate 60 percent of their farmland, are likely to be 87 percent of the long-period average this year, according to an official forecast that is widely seen as optimistic based on continued dry conditions.

The weather office, which initially predicted normal rainfall for the season, has scaled back its forecast twice.

* here (Additional reporting by Mayank Bhardwaj and Rajkumar Ray; Editing by Tony Munroe and Keiron Henderson)