India set to receive average monsoon rains, in boost for poll-bound Modi

NEW DELHI (Reuters) - India is likely to receive average monsoon rains in 2018, the the state-run India Meteorological Department said, raising the possibility of higher farm and economic growth in Asia’s third-biggest economy, where half of the farmland lacks irrigation.

FILE PHOTO: A man covers his head as he crosses a road during heavy rain in Kolkata, July 7, 2017. REUTERS/Rupak De Chowdhuri/File photo

Monsoon rains, the lifeblood of the country’s $2 trillion economy, are expected to be 97 percent of a long-term average, K.J. Ramesh, director general of IMD, told a news conference.

“We see very less probability of a deficit monsoon,” Ramesh said on Monday.

Other than lifting farm and wider economic growth, a spell of good rains will keep a lid on inflation, potentially tempting Prime Minister Narendra Modi to bring forward general elections due in May 2019.

India’s weather office defines average, or normal, rainfall as between 96 percent and 104 percent of a 50-year average of 89 cms for the entire four-month season beginning June.

“The moderate La Nina conditions developed in the equatorial Pacific during last year started weakening in the early part of this year and currently have turned to weak La Nina conditions,” IMD said in a statement.

La Nina is a weather pattern that brings equatorial Pacific Ocean temperatures, rainfall patterns and winds closer to average.

The latest forecasts from global models indicate conditions over the Pacific will turn neutral before the beginning of monsoon season, the IMD said.

Good rains will spur the planting of crops such as rice, corn, cotton and soybeans, accelerating economic growth that rose 7.2 percent in the December quarter, its fastest in five quarters, compared with China’s 6.8 percent in that quarter.

Growth in the December quarter restored India’s status as the world’s fastest growing major economy.

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Average monsoon rains, with good distribution in July and August would support rural demand, said Rupa Rege Nitsure, group chief economist at L&T Finance Holdings, a Mumbai-based non-banking finance company.

Good rains boost rural incomes, lifting the demand for an array of consumer goods ranging from lipsticks to refrigerators.

An average monsoon would keep food inflation lower, Nitsure said.

On Monday, government data showed India’s wholesale food prices fell 0.07 percent in March 2018 from a year earlier.

India’s weather office will update its forecast in June.

On an average, the IMD has forecast accurately only once in every five years over the past two decades, even after taking into account an error band of plus or minus 5 percentage points.

Rains usually lash Kerala state on the south coast around June 1, and cover the whole country by mid-July. Timely rains trigger planting of crops such as rice, soybeans and cotton.

The monsoon usually covers the half of the country in the first 15 days. The rains reach central India’s soybean areas by the third week of June and western cotton-growing areas by the first week of July.

Good rains would help boost soybean output which in turn could cut expensive vegetable oil imports by India, the world’s biggest importer of edible oils, which is the third-biggest import item after crude oil and gold.

Currently India is struggling with huge amounts of sugar and good rains could further bump up the supply of the sweetener.

“A good monsoon will help bring down edible oil imports, but it could also create a problem of plenty in pulses and sugar,” said a Mumbai-based dealer with a global trading firm.

Average monsoon rainfall will help India retain its position as the world’s top rice exporter.

GRAPHIC: The Indian monsoon here

Reporting by Sudarshan Varadhan and Mayank Bhardwaj; Additional reporting by Rajendra Jadhav and Suvashree Choudhury in MUMBAI and Manoj Kumar in NEW DELHI; Editing by Malini Menon and David Evans