Rain forecast raises hopes of farm boost, sales boom

The India Meteorological Department’s (IMD's) forecast on Tuesday of a normal monsoon this year has raised the prospects of higher agricultural production, lower food inflation and better rural sales for a host of consumer goods and services companies.
Although the monsoon-dependent agriculture con-tributes only about 16 per cent to its national income, farm output impacts food prices for urban consumers, rural incomes and markets for manufactured products and services.
At the agriculture ministry, excitement ran high after the forecast. The pro­spects of a bumper harvest in the monsoon-fed kharif season comes on top of a record crop of cereals, oil­seeds, pulses and cotton that the ministry has estimated to have been achieved in 2010-11.

Agriculture secretary P K Basu said his ministry expected the forecast to induce more area to come under cotton, tobacco and pulses in addition to the main kharif crop of paddy. “Concerns of lower than normal rainfall over north-west and north-east India were there last year too, and still we achieved our second-best year of agricultural output,” he added.

“With a normal monsoon forecast, we are likely to head for bumper kharif crops of rice, maize, pulses and oilseeds,” Nityanand Roy, a senior analyst with Agriwatch, a New Delhi-based consultancy, said.

Agricultural scientists are hopeful that on-going measures to boost pulse, oilseed and cotton output will receive a further boost. “The availability of seeds is better than last year. And if the rains are as good and widespread as last year, farmers will spare no effort to adopt better seeds and inputs to raise productivity,” said Swapan Dutta, deputy director- general of crop sciences at the Indian Council of Agriculture Research.

A normal monsoon also means less migration from rural areas and more disposable income in the hands of the rural population. In turn, this means they will likely spend more on consumer goods and services, the director of Ncaer’s centre for macro- consumer research, Rajesh Shukla, said. Agriculture employs almost 60 per cent of the country’s labour. In absolute numbers, over 60 million people work on farms, according to labour ministry estimates.

Shukla said the cost of migration reduced the income levels of migrant workers and this could be up to 15 per cent of their average annual income. Financial Chronicle reported on April 15 that the implementation of the National Rural Employment Guarantee Scheme has already led to a labour shortage in the construction sector, for whom a normal monsoon is not good news. The movement of migrant farm workers to the grain bowl states of Punjab and Haryana has also dwindled following last year’s good monsoon. This year may see a repeat.

In the commodity market, prices are likely to be less volatile for farm produce, elping to bring down food inflation. “We saw price volatility after the worst drought in 37 years hit farm production in 2009. The lag effect of high prices we have felt so far is tapering off, and thanks to the normal monsoon last year, we expect to see food inflation stable around 9 per cent for rest of the year,” said Naveen Mathur, vice- president and research head with Angel Investments.
“The IMD’s long range forecast for June to September this year is most likely normal rains of 96 per cent to 104 per cent of the long period average (LPA). There is very low probability for seasonal rains to be deficient (less than 90 per cent of LPA) or excess (96 per cent to 104 per cent),” the minister for earth sciences, P K Bansal, said, releasing the government’s early monsoon outlook.

Some concerns about rain in the paddy and cotton growing north-west and horticultural north-east India could occur. “We would ascertain the onset and spread of the monsoon in June. Distribution of rain could be a little less than normal over the north-west and north-east due to the impact of La Nina,” Ajit Tyagi, IMD director- general, said.

As per market expectations, stock indices are likely to rise by 5 to 10 per cent, given a higher farm output and lower inflation.

After the drought of 2009, farm output declined by 0.2 per cent in 2009-10. Food inflation zoomed to 22 per cent the following year. However, after a normal monsoon next year, the 2010-11 crop output became the second best after the record output of 2008-09, taking the farm sector’s growth to nearly 6 per cent, as per estimates of the Planning Commission deputy chairman, Montek Singh Ahluwalia.