Analysis: Why The Skymet Forecast Matters To Policymakers

Analysis: Why The Skymet Forecast Matters To Policymakers

News of a normal monsoon, though positive, may not bring real cheer from the point of view of the economy. There are several other elements that have to fall in place and will be known only post June when the monsoon winds arrive and progress into the interiors

Madan SabnavisUpdated: Friday, April 12, 2024, 10:06 PM IST
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Representative Pic | Pixabay

Skymet has predicted a normal monsoon for this season. Coming in April, this news may be too premature for one to feel confident of a good rainfall. It is almost certain that the IMD too will have a similar forecast. In the past the IMD has always been gung-ho about such predictions while the Skymet has been cautious. This time round it would be similar views on the course of the monsoon. But is this news something to cheer about?

The news is positive to the extent that there will not be the shadow of El Nino which was responsible for a sub normal monsoon last year. But this fact was known as the La Nina (which is the opposite of El Nino) winds would dominate this time thus bringing in the cooler winds. But the concept of a normal monsoon is quite fuzzy and may not really mean much for the country until it arrives and departs.

Monsoon officially starts in the first week of June and departs by end of September. This is the critical starting point for the evaluation of a monsoon. In the last 5-6 years the arrival has been delayed and can be towards the end of June. More importantly the arrival is recorded at the first touch point which is coastal Kerala; and the progress varies depending on the intensity of the winds. It is normally only in July that the monsoon makes an appearance in the larger part of the country. The arrival time is important as the sowing pattern is driven by this factor. A delayed monsoon and uncertainty of the same can drive farmers to change their crop and in particular, rice gets affected as it requires the maximum amount of water.

The arrival becomes more important today because the reservoir levels are at a low. At 35% of full capacity it is lower than the level of 42% at the same time of last year. The IMD has already warned of extreme heat conditions in the coming months which is a concern. With high levels of evaporation lower water availability will affect all people. Water availability is important for households, cattle, horticulture crops and fodder, besides drinking purposes. Availability has already been affected by the depleting reservoir levels. It is hence critical that the monsoon arrives on time, especially in the interiors, or else there is risk of fall in production of horticulture as well as fodder which can affect food inflation including milk.

The other aspect of the concept of a normal monsoon is that it is an aggregate number where the total rainfall received is calculated. It is something like GDP growth where we get to know how the country has grown. It does not tell us about the distribution. There are technically 36 meteorological zones for the country. Each of these zones have different weather patterns and receive different amounts of rainfall. Those close to the coast tend to have better rains than those in the interiors. Some states which are landlocked would be in the rain shadow area which become vulnerable to the monsoon winds weakening. This does not come out from the normal monsoon number.

Further the concept of normal for various regions is quite vast. A normal monsoon is if the rainfall is between -19% to +19% of average when looking at the various divisions. For the country as whole the long period average is calculated over a long period of time of 30m or 50 years. Rainfall which is between 96-104% of this number is called a normal monsoon.

The inter-spatial distribution is important because it determines the crop sowing choice of farmers. This also finally determines the crop prospects. The rains are critical because even today around 60% of the kharif crops are monsoon-dependent as they do not have access to irrigation facilities. And given the depleting levels in the reservoirs, drawing water for these crops will not be possible. Last year there was a deficit of 5.6% at the aggregate level which also meant that the reservoir levels were lower than normal. The level as of October 2023 was 74% as against 89% in 2022. By December end the level came down to 60% as against 75% in 2022. This is why the monsoon prospects become even more relevant today.

It may be recollected that the advance estimates for GDP growth for FY24 does indicate that agriculture is the only sector that has underperformed with growth of 0.7%. Also there has been high food inflation with cereals, pulses, spices and vegetables witnessing double-digit numbers all through the year. Milk inflation too has ranged around 7% with higher input costs contributing to the price rise. Hence it is essential that the kharif crop — which covers rice, maize, tur, urad, moong, groundnut and soyabean among others — be normal to keep prices under control. The MSPs which will be announced are bound to be increased in the range of 4-6% which is an annual feature. A normal monsoon with uneven distribution can affect specific crops which can spook inflation. This is why policymakers are concerned about the monsoon, as kharif crops constitute roughly 50% of crop output in the country.

Therefore news of a normal monsoon, though positive, may not bring real cheer from the point of view of the economy. There are several other elements that have to fall in place and will be known only post June when the monsoon winds arrive and progress into the interiors. Meanwhile, the reservoir levels have to be monitored quite closely as the situation is turning grave.

The author is Chief Economist, Bank of Baroda and author of ‘Corporate Quirks: The Darker Side of the Sun’. Views are personal

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