India’s economic outlook at the mercy of monsoon

The monsoon, which accounts for about 75 per cent of India's annual rainfall, is the lifeblood of its nearly $3 trillion agriculture-dependent economy.

Asia's third-largest economy and the world's top producer of a host of critical crops such as rice, wheat and sugar has received 11 per cent more than average monsoon rain since the four-month season began on June 1. An average monsoon is rainfall between 96 per cent and 104 per cent of a 50-year average of 89cm over the season.

However, the uneven nature of this year's monsoon - patchy in some areas, with torrential downpours in others - has raised concerns about crop yields and output, complicating government efforts to tame inflation.

The spread and distribution of monsoon rainfall has been erratic across India. Overall monsoon rains were 8 per cent below average in June, with a shortfall as high as 54 per cent in some regions.

A sudden surge in the first half of July, however, erased the deficit and caused flooding in many states. While the southern, western, and central parts of the country have received above-average rainfall, farmers in the northern and eastern regions have suffered from a lack of summer rain.

Though the sowing of cotton, soybeans and sugar cane is higher than last year, traders are worried about crop yields after planting was delayed by the suboptimal June rain.

Meanwhile, a prolonged period of above-average rain in the cotton, soybean and sugar cane belt could cripple the country's food output.

A dry spell in June and heavy rains in July have hit almost every summer-sown crop, but rice, cotton and vegetable crops are the worst hit.

India's top rice regions in the east - Bihar, Jharkhand and some parts of West Bengal and Uttar Pradesh states - have recorded a rainfall deficit as high as 57 per cent. As a result, rice planting has dropped by 19 per cent so far this season.

Conversely, incessant rain and floods have hit cotton, soybean and pulse crops in Gujarat, Maharashtra, Madhya Pradesh, Telangana and Andhra Pradesh states.

Rice is the most critical crop for India, the world's biggest exporter of the staple. Lower output could force New Delhi to curb rice shipments to ensure sufficient supplies for its 1.4 billion people.

Any protectionist measure by India, the world's second-biggest producer of the grain, will drive up prices in global markets already hit by record food price inflation.

Food prices, especially for rice, pulses and vegetables, are likely to climb as trade, industry and government officials concede that the erratic monsoon is likely to cut output from summer crops.