NEW DELHI Global experts meeting this week are likely to forecast a near-normal monsoon for India, providing international commodities market the first hints of demand and supply in 2011/12 from one of the world's top producers and consumers of key farm goods.
Failure of monsoons can force India into the international markets as a buyer, pushing up global prices of basic foodstuffs, while favourable rainfall can boost its exports, helping governments throughout Asia to battle food inflation.
Agriculture accounts for a 14.6 percent of India's GDP and the outcome of the annual June-September southwest monsoons impacts the nation's economy, which is struggling with high food inflation and a massive subsidy bill for fuel, grains and fertilisers.
A normal monsoon means the country receives rainfall between 96-104 percent of a 50-year average of 89 centimetres during the four-month rainy season, according to the India's weather office classification.
Monsoons also 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 areas account for about 70 percent of India's annual gold consumption.
India witnessed normal rains last year and the April 13-15 meeting of weather officials in Pune is likely to forecast a near-normal monsoon this year based on various forecasting models, Indian officials said.
"The weakening phase of La Nina has given rise to the expectation of a near-normal monsoon in 2011," said D. R. Sikka, former director of the Pune-based Indian Institute of Tropical Meteorology.
Other officials of the Indian weather office, who did not wish to be identified, agreed. A La Nina weather pattern causes heavier-than-normal rains in South Asia. After the weak phase, the La Nina is expected to enter a neutral phase without posing any threat to good rainfall during the monsoon season.
The Pune meeting will issue a consensus forecast for the monsoon on the final day of the conference.
While India is mostly self-sufficient in staples like wheat and rice for its 1.2 billion population, drought can push the country into international markets as it did in 2009 when India had to import sugar -- sending global prices to record highs.
The government subsidises the price of key crops to contain inflation and ensure half a billion poor -- many of whom spend up to 60 percent of their incomes on food -- can afford to eat.
The first official Indian forecast is not due until later this month. During 2009, the driest monsoon in 37 years caused widespread losses to key crops such as oilseeds and sugarcane, pushing up food inflation and causing a political headache for the government.
Monsoon forecasting in India is carried out by government-backed organisations and has significant political implications in a country where more than 60 percent of voters are in rural communities and form the bulk of the government's support base.
Bad rainfall results in political pressure on the government, as farmers demand higher rates for their produce and ask bureaucrats to waive loan repayment and electricity charges, impacting public finances.
Prime Minister Manmohan Singh's ruling Congress government, mired in a slew of corruption charges, has struggled with double-digit food inflation for most of its second term in office since 2009 when it won an election partly by boosting farm incomes. In early 2010, India's food inflation went as high as 22 percent on supply constraints.
The government hopes monsoon rains -- which traverse the subcontinent from its southern tip to the Himalayan north from June through September -- would boost farm output and help lower prices, potentially providing a timely political boost ahead of key state elections.
"The budget, and the economy as a whole, it is said is a gamble on the monsoon," Paranjoy Guha Thakurta, a leading Indian political columnist, told Reuters. "The reason is simple -- roughly 60 percent of crop area in the country is rain-fed."
Higher agricultural supplies triggered by normal rains could encourage the Indian government to allow overseas sale of wheat and lift export curbs on rice.
India faces a storage problem as the 2011 wheat harvest is set to be a record, exceeding demand for a fifth straight year.
"The government can make a bold decision on grain exports. It can tinker with policies if the monsoon shapes up on expected lines," said Veeresh Hiremath, research head of the Hyderabad-based broking Karvy Comtrade.
Higher oilseed output last year helped India increase oilmeals exports to traditional buyers in southeast Asia by more than half to 5.1 million tonnes.
In most parts of India, the monsoon accounts for 75-90 percent of the total annual rainfall.
The monsoon impacts other sectors of Asia's third largest economy, as farmers spend their cash on cars, motorcycles and consumer goods. Good rainfall reduces demand for diesel, used to pump water from wells for irrigation when rainfall is scant.
(Editing by Jo Winterbottom, Himani Sarkar)
Trending On Reuters
British telecoms operator Vodafone has picked Bank of America Merrill Lynch (BofA), Kotak Investment Banking and UBS as joint global coordinators of its Indian unit's IPO, people familiar with the matter said, kicking off its long-awaited listing plan. Full Article