India forecasts normal monsoon for 2011

by Reuters
Tuesday, 19 April 2011 11:07 GMT

* Forecast to be reviewed in June

* Earlier forecasts have been for normal rains

* Agriculture accounts for 14.6 pct of India's GDP (Adds details, quotes)

By Mayank Bhardwaj and Ratnajyoti Dutta

NEW DELHI, April 19 (Reuters) - India on Tuesday forecast normal rains for the 2011 monsoon, strengthening the prospect for a good farm output that could help bring relief to Asia's third-largest economy in its battle with high food prices.

Rainfall is likely to be 98 percent of the long-term average, Earth Sciences Minister Pawan Kumar Bansal told reporters, adding the forecast would be reviewed in June when monsoon rains arrive in South Asia.

"There will be very low probability for seasonal rainfall to be deficient or excess," Bansal said.

Good rainfall would boost food output in India, one of the world's top consumers and producers of a range of agricultural commodities, and also help governments throughout Asia to battle food inflation.

A failed monsoon can force India into the international markets as a buyer, as happened in 2009, a year when initial forecasts were calling for normal rains.

A normal monsoon means the country receives rainfall between 96-104 percent of a 50-year average of 89 centimetres during the four-month rainy season, according to the India's weather office classification.

India's government, which is struggling with not only inflation but also a massive subsidy bill for fuel, grains and fertilisers, would hope for some price relief from a good monsoon at a time when it is facing key state elections.

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For a factbox on Indian monsoon, see [ID:nL3E7FB0WU]

For a Q+A on progress of monsoon, see [ID:nL3E7FB0X3]

For a graphic on India monsoon and key summer crops

http://link.reuters.com/zux88r

For a graphic on India monsoon - forecast vs actual

http://link.reuters.com/xux88r

For a graphic on Indian monsoon and sugarcane output

http://link.reuters.com/xaj98r

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The deputy head of India's main state-run agriculture research organisation had earlier said good rains were expected over southern and central regions boosting output prospects for rice and soybean crops, but lower rainfall in western region would impact reservoirs.

While India is mostly self-sufficient in staples like wheat and rice for its 1.2 billion population, drought can push the country into international markets as it did in 2009 when India had to import sugar -- sending global prices to record highs.

MONSOON POLITICS

Monsoon forecasting in India is carried out by government-run organisations and has significant political implications in a country where more than 60 percent of voters are in rural communities and form the bulk of the government's support base.

Prime Minister Manmohan Singh's Congress party is fighting key state elections now, and analysts say an unfavourable forecast was unlikely because of its impact on the confidence of rural voters.

"At this juncture (when elections are being held), the government has limited choice in announcing a bad monsoon which may also lead to a spike in food prices," said S. Raghuraman, a New Delhi-based independent commodities analyst.

Bad rainfall results put political pressure on the government, as farmers demand higher rates for their produce and ask bureaucrats to waive loan repayment and electricity charges, impacting public finances.

Singh's ruling Congress government, mired in a slew of corruption charges, has struggled with double-digit food inflation for most of its second term in office since 2009 when it won an election partly by boosting farm incomes.

Agriculture accounts for 14.6 percent of India's GDP and with about 60 percent of crop land dependent on monsoon rains, the impact of the annual June-September southwest monsoons is significant on the nation's economy.

The government subsidises the price of key crops to contain inflation and ensure half a billion poor -- many of whom spend up to 60 percent of their incomes on food -- can afford to eat.

Monsoons also impact demand for gold in India, the world's top consumer of the metal, as purchases get a boost when farming incomes rise amid high crop output. Rural areas account for about 70 percent of India's annual gold consumption.

The monsoon impacts other sectors of the trillion-dollar economy, as farmers spend their cash on cars, motorcycles and consumer goods. Good rainfall reduces demand for diesel, used to pump water from wells for irrigation when rainfall is scant. (Writing by Krittivas Mukherjee; Editing by Michael Urquhart)

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