India Posts Lowest June Rainfall in Five Years as El Nino Looms

With 90 percent of India getting deficient rains, sowing of crops from rice to corn, soybeans and cotton has been delayed, hampering Prime Minister Narendra Modi’s efforts to rein in inflation and revive growth from near a decade low. An estimated 833 million people out of the 1.2 billion population depend on agriculture for their livelihood and the sector accounts for 14 percent of the nation’s gross domestic product.

“The rainfall pattern has gotten distorted this year, and it will have some impact on agricultural productivity,”Dharmakirti Joshi, chief economist at Crisil Ltd., S&P’s local unit, said by phone from Mumbai. “If rains revive in July and August, then you can make up for it because you have a window for late sowing till July 15. It is a risk to food inflation but not an unmitigable risk.”

Consumer inflation gains in India slowed to 8.28 percent in May, a three-month low, official data show. That compares with 8.34 percent in Pakistan and 2.5 percent in China. Food makes up about 50 percent of India’s consumer-price inflation basket.

Seasonal Showers

Monsoon rainfall will be 7 percent below average this year as the El Nino emerges, the meteorological department predicts. In 2009, the last time India experienced the event, rainfall was 22 percent below the 50-year average, reducing food-grain output and more than doubling inflation from the previous year, official data show. The seasonal showers are the main source of irrigation for the nation’s 263 million farmers because about 55 percent of crop land is rain dependent.

El Nino, which can roil world agricultural markets as farmers contend with drought or too much rain, may be established by September, according to climate models surveyed by Australia’s Bureau of Meteorology. Forecasters from the U.S. and the United Nations are also warning an El Nino will occur.

The government should take steps to tackle any shortage of food items caused by inadequate rains and import lentils and edible oils, Crisil’s Joshi said.

‘Providing Relief’

“It now behooves all policy makers, at the center and the state, to start planning for the worst,” Saugata Bhattacharya, a Mumbai-based economist at Axis Bank Ltd., said in an interview to Bloomberg TV India yesterday. “The budget should now start to be leveraged for providing relief in the worst-hit districts, both by way of subsidies and movement of stocks.”

Modi’s government has pledged to tackle price gains by offloading 5 million tons of rice, about a quarter of its state stockpiles, at subsidized rates and cracking down on food hoarders. It will also help states to import pulses and cooking oils if needed and set minimum export prices for potatoes, according to Finance Minister Arun Jaitley.

Farmers planted rice in 2.2 million hectares as of June 27, down from 3.6 million hectares a year earlier, according to the Agriculture Ministry. Sowing of oilseeds has dropped 47 percent to 479,000 hectares, while the area under cotton has slumped 48 percent to 2.9 million hectares, ministry data showed.

“We will watch the progress until the first week of July before deciding the next course of action,” Agriculture Commissioner J.S. Sandhu, said by phone from New Delhi.

To contact the reporters on this story: Prabhudatta Mishra in New Delhi at pmishra8(at)bloomberg.net; Swansy Afonso in Mumbai at safonso2(at)bloomberg.net

To contact the editors responsible for this story: Jake Lloyd-Smith at jlloydsmith(at)bloomberg.netThomas Kutty Abraham, Dick Schumacher