The Indian Meteorological Department (IMD) has predicted a normal monsoon at 101% of the long period average (LPA) for the season, but so far it is lagging that target. Monsoon lost momentum during the critical sowing period in the first three weeks of July, after a good start in June that saw rains 7% above normal. In all, cumulative all-India rainfall was 9% below normal (or LPA), as on August 16, 2021. Same period last year, all-India rainfall was 4% above normal. The recovery in rains since then has not been able to erase the cumulative deficiency.
It has not only rained less overall this year compared with the previous, the distribution has also been more uneven with three of the four meteorological regions having received below normal rainfall so far. At the regional level, the highest deficiency (as on August 16, 2021) was seen in the central region (13% below normal). This is the second-largest crop producing area in the country, accounting for 28.2% of the total agriculture production.
Rainfall volume data is only one part of the story. Vulnerabilities that arise from inadequate irrigation also need to be considered. CRISIL's Deficient Rainfall Impact Parameter (DRIP) does just that, providing a better impact assessment of deficiency as it factors in the irrigation buffer available for states and crops. The latest DRIP scores – as on August 11 – suggest stress for Gujarat and Odisha and groundnut and cotton.
The persistently inadequate rains in Gujarat, which accounts for a fifth of India's oilseeds production, is a cause of worry. The stress has now extended to cotton, where again, Gujarat is the country's largest producer with around a quarter share. While Gujarat appears to have received the highest shock in terms of the scantiest rainfall, its impact on economic growth could be limited, given that agriculture's share (8.2%) in its totalgross value added is lower than the state-wide average of 10.1%. The impact on India's total crop output may also be limited, given Gujarat's lower-than-average crop production share. The same could be said for Odisha. Deficient monsoon in Kerala, on the other hand, is more likely to have an impact on its growth as agriculture has a relatively larger share in its economy (12.0%).
The upshot: Despite pockets of stress in some parts of the country due to deficient rainfall, we do not yet see cause for major alarm in overall agricultural growth. We expect the sector to grow at 3% on-year in the current fiscal. Kharif sowing, which was slow to begin with, has caught on well as the monsoon progressed and important kharif growing states received adequate rainfall. Kharif sowing for most crops has been higher than the normal and could allay inflation concerns.
