| NEW DELHI
NEW DELHI A shortfall in monsoon rains has widened to nearly 50 percent of average in the past week, making a revival next week crucial for farmers to sow summer-planted crops such as rice, corn, cane, cotton and soybean.
The annual rains are crucial for farm output and economic growth as about 55 percent of the South Asian nation's arable land is rain-fed.
Farm sector accounts for about 15 percent of a nearly $2-trillion economy, Asia's third-biggest.
The spectre of a drought will be another headache for Prime Minister Manmohan Singh's Congress-led fractious coalition government which is battling a slowing economy, falling rupee and rising food inflation.
Some economists believe a deficient monsoon could prolong the current policy inaction and delay stalled economic reforms, including raising diesel prices as farmers, a key voting bloc, use the fuel to run pumps for irrigating fields.
Diesel accounts for more than 40 percent of India's oil product demand. Analysts say keeping a lid on diesel prices will make it difficult for the government to cut fiscal deficit, projected at 5.1 percent of the GDP.
"If July rains do not improve in the next 15-20 days, policy uncertainty will prevail, with a high dose of inflation," said Siddhartha Sanyal, chief India economist at Barclays Capital.
"The situation was pretty bad in June but if July rains improve then sowing will be good and policy uncertainty will ease," Sanyal said.
In the first three months of 2012, India's economic growth slumped to its lowest in nine years, leading to a cut in the country's credit outlook by both Fitch and Standard and Poor's. The economy is expected to grow around 6.5 percent in the current 2012/13 fiscal year.
The June-September rains were 49 percent below average in the week to July 4, widening the 18 percent shortfall in the previous week. Between June 1 and July 4, rains were 30 percent below average.
Poor monsoon rains impact rural incomes, hitting sales of a slew of products -- from refrigerators to motorcycles. A dry spell also impacts gold purchases in the world's top importer of the precious metal.
But the rains revived over cane, oilseeds and cotton areas of India's western region, officials at the India Meteorological Department (IMD) said.
There had been increased rainfall over states such as Maharashtra, Gujarat and Madhya Pradesh in the past 24 hours, S.C. Bhan, a director at the IMD, told Reuters.
A source in the weather office said monsoon rains had moved north, halting in central India.
The rains would now move to the northwestern region, bringing showers to parched New Delhi in the next two to three days, IMD's Bhan said.
CRUCIAL JULY RAINS
But if the rains do not improve by July 10, India will head towards a bad monsoon year, D.R. Sikka, a former director at the Indian Institute of Tropical Meteorology, has said.
The June to September rains should improve next week, farm minister Sharad Pawar said on Tuesday.
India is one of the world's biggest consumers and producers of rice, sugar and grains. The country, awash with grains, is currently exporting rice, wheat, cotton and sugar but the country is importing vegetable oils and pulses to meet a domestic shortfall.
In 2009, the worst drought in nearly four decades forced India, the world's top consumer, to buy large quantities of sugar from biggest producer Brazil, hoisting benchmark New York futures to a 30-year high.
(Writing by Mayank Bhardwaj; additional reporting by Manoj Kumar and Rajendra Jadhav in MUMBAI; editing by Jason Neely)