According to IMD, 2019 Monsoon is likely to be normal to the tune of 96% of Long Period Average (with an error margin of +/-5%). However, Skymet has forecasted that monsoon would be below normal at 93% of LPA (with the same error margin). Meanwhile, there was a week’s delay in monsoon reaching Kerala (on June 8). As per World Weather Inc, rainfall in western and northern India is expected to provide short-term relief over the coming week while there could be intermittent rains in southern, central and eastern India. Overall, this is unlikely to improve soil moisture and planting conditions. Cotton conditions in northern India will be mostly favourable. Current rainfall is 42% below normal; 52% of area has received scanty rainfall. Barring western and southern India, water reservoir levels are above average. Covered kharif area currently stands at 7.3% of the normal area, being led by sugarcane (98% of normal area) and cotton (11%). Rest of the kharif crop sowing is negligible so far.
We do not see meaningful upside risk to inflation and interest rates emerging from the unfavourable monsoon. Food inflation may not rise sharply, but there could be an adverse impact on the health of rural India and its income, which in turn will dent demand for various consuming sectors, aggravating already growing concerns about weakening consumption.
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