India’s forecast for the all-important monsoon rains is out—and it isn’t looking very promising for the Narendra Modi government.
If the predictions by India’s meteorological department are accurate, 2015 will be the second straight year that the country will have to deal with deficient rains.
On Wednesday (April 22), the met department issued its first monsoon prediction for the year, which estimated that rainfall will be 93% of a 50-year average benchmark. That means below normal rains.
Last year, too, India recorded below normal rainfall at 88%, with some of India’s northwestern states hit particularly hard.
The monsoon, which typically begins at the end of May and goes on till September, accounts for about 70% of India’s annual rainfall. And with more than half of the country’s farm land dependent on rains, a weak monsoon can be damaging to the agriculture sector—and the entire economy.
Ever since Modi took charge as India’s prime minister in May 2014, his government has been assailed by bad weather.
Most recently, unseasonal rains wrecked havoc in India’s northern and central states last month, which could push up costs of fruits and vegetables by a staggering 25% according to the industry body, the Associated Chambers of Commerce and Industry of India.
In October 2014, a cyclone ravaged the coastal city of Visakhapatnam, with damage estimated to be worth some Rs8,000 crore ($1.2 billion).
A month before that, in September, India’s northern-most state of Jammu and Kashmir was devastated by the worst floods in half a century. Some 300 people lost their lives and thousands were displaced.
Deficient rainfall could lead to a drop in the country’s agricultural output. Losses and low output will also impact rural demand and consumption, especially for sectors like consumer goods, automobiles and cement, among others. According to 2011 census, 54.6% of India’s population is employed in agriculture.
Meanwhile, this forecast could also have an impact on the country’s benchmark interest rates. Reserve Bank of India governor Raghuram Rajan has indicated that any change in policy or interest rate trajectory will depend on the level of inflation. This, in turn, depends on rainfall.
With the below normal monsoon forecast, food prices in the country might rise, thus driving up inflation and narrowing the scope for Rajan to cut rates further.