Weak rainfall in India during the ongoing monsoon season has raised concerns of a first drought in five years. Till now, the overall rainfall stood at around 45 percent, below the seasonal average. Poor monsoon can impact Indian economic growth as the agriculture sector, which comprises around 15% of the GDP, is mainly depended upon the monsoon rains. Further, a poor monsoon can impact India’s exports, stoke inflation particularly food inflation and lead to lower demand for products ranging from cars to consumer goods. In 2009, India had faced worst drought in nearly four decades that forced the country to import large amount of food commodities.
The Indian Meteorological Department (IMD) had already highlighted that southwest monsoon may be below normal, with the country likely to receive 93 percent of the long-period average (LPA) rainfall. The department further indicated that probability of the El Nino effect, which may result in deficient rains, especially in the latter half of the monsoon season. Except for the northeast, every other part in India is predicted to get below normal rainfall this season. As per the IMD’s region-wise prediction, seasonal rainfall over north-west India is likely to be 85% of LPA, 94% over central India, 93% over south peninsula and 99% of LPA over north-east India.
Inflation in food articles rose by 9.50% y-o-y in May as compared to 8.64% in April. Food inflation can increase in near term as weak monsoon rains would impact the performance of Indian agriculture sector.
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