The monsoon season in India is not only important for the agriculture industry but also for policymakers as it has an impact on the consumer and wholesale price indices. Due to the delayed southwest monsoon, the sowing of Kharif crops’ progress has also been weak. Kharif crops include cereals such as rice, jowar, millet, and maize, fruits such as watermelon, muskmelon, orange, etc., seed plants such as cotton, sesame, urad bean, soya bean, etc, and vegetables such as okra, green beans, chilies, turmeric, tomato, bitter gourd, etc. Furthermore, farmers in India depend on irrigation that is naturally induced by monsoon rains and inadequate monsoon could negatively impact GDP growth.
Monsoon rains are imperative to Indian farming; 51.2% of farms in India are rainfed. Monsoon is integral for the cultivation of Kharif crops and early rains are crucial for the sowing of cotton, pulses, rice, and oilseeds. Summer crops contribute 50% of India’s total food output and a delayed monsoon could negatively impact food production subsequently having an impact on food inflation.
In FY 21, the share of agriculture in India’s GDP was 19.9%, and the agriculture and allied products market was valued at $ 41.25 billion. Additionally, agriculture contributes 13.98% and 32.96% share in the consumer and wholesale price index. Hence, shortages in supply due to delayed monsoon could lead to higher inflation levels.
Monsoons contribute to 76.7% of rain every year and any changes in the intensity or arrival are closely monitored by policymakers. The Centre devises policy measures for food safety, including imports, price stability, buffer stock, and financial assistance, i.e. farm credit, insurance cover, etc. The RBI formulates its monetary policy whilst taking into account expected inflationary pressures and credit policy. For example, in June 2021, the monetary policy released by RBI mentioned that a normal monsoon is expected due to which food grain productions were expected to reach record levels and adequate buffer stock would be produced to keep cereal prices in check. This was expected to aid economic recovery.
The overall rainfall for the month of June was above normal; 9.6% above the Long Period Averages (LPA)* however from 21 June 2021 onwards, it turned deficient at 30.2% below LPA. As of 16th July 2021, only 57% of the total Kharif crop area was sown, 11.56% lower than in July 2020. This could delay economic recovery, lower food grain production, hamper economic recovery, and cause an increase in food inflation levels.
*LPA- averages of rainfall received over a 50-year period between 1951 and 2001