After a below-normal monsoon, India has received abundant rainfall this year. This aided the sowing of kharif crops in August, bringing much-needed relief after low production last year. But excess rainfall in September is a threat to crops before the harvesting season and could potentially stem the decline in inflation.
So far in September, rainfall has been 8% above normal. Telangana, Andhra Pradesh, Maharashtra and Gujarat are among the 12 states that have received ‘large excess’ (exceeding the long-period average, or LPA, by at least 60%) or ‘excess’ (exceeding LPA by 20-59%) rainfall, a Mint analysis of data from India Meteorological Department (IMD) showed.
But more importantly, the weekly progress of the monsoon has been uneven in the 36 divisions tracked by IMD, adding to the uncertainty. June mostly saw deficient rainfall, July and August largely excess, and September a mix of excess and deficient rainfall. Bihar and Punjab, two key wheat-growing regions, have had deficient rainfall.
“With overall sowing nearly completed, the focus will now shift toward the harvesting season with higher-than-normal rains likely to cause crop damage and thus pose upside risk to food inflation,” Emkay Global Financial Services said in a note on 16 September.
While concerns about excess rainfall have gripped the country, the agriculture ministry has estimated that crop loss may only be 2-4% and is unlikely to hit production significantly. However, excess, uneven and unseasonal rainfall have all led to price spikes in the past, making inflation management tricky.
For decades, India received normal or below-normal monsoon rainfall. But in recent years, above-normal monsoon has become more frequent. Since 1965, India has had 23 years of below-normal rainfall, 23 years of normal rainfall and 14 years of above-normal rainfall. Of the 14 above-normal rainfall years, four were in the past five years. This includes the 2024 forecast by IMD.
While the government is not particularly worried about crop losses this year, market experts told Mint that 10-40% of the paddy sowing areas in Telangana, Coastal Karnataka and Andhra Pradesh, and 20-30% of soybean sowing areas in Gujarat and Maharashtra have been affected. The impact on tur and urad crops has been relatively less, with 5-10% of the sowing area affected in Maharashtra and Gujarat. “There may not bee a scarcity of staple foods but damage to crops is expected,” said SK Pradhan, additional director general at the Indian Council of Agricultural Research (ICAR).
Excess rainfall, especially in September, has brought fears of higher food prices, but its impact on agricultural output has not been particularly worrying in the past decade, during which has had five below-normal monsoon years. Four of these five years saw agriculture gross value added (GVA) either declining or growing tepidly. On the other hand, agriculture GVA growth in the three above-normal rainfall years has been decent, ranging from 4.0-6.7%, which suggests deficient rainfall may be more damaging to the agriculture sector than excess rainfall.
While agricultural production may be significantly damaged by excess rainfall, there have been cases of supply-demand mismatch leading to price pressures. A Reserve Bank of India paper co-written by deputy governor Michael D Patra in January noted that climate change conditions such as heatwaves, uneven and unseasonal rainfall, and hailstorms are increasing the vulnerability of food prices.
India has grappled with high inflation since 2019, with food price volatility adding to the uncertainty. A series of events – the pandemic, the Ukraine war, climate change, excess rains and crop damage – have kept inflation elevated. After remaining low for a few years, food inflation started surging in September 2019 and hit a high of 14.19% in December 2019 as heavy rainfall massively damaged onion output. In July 2023, food inflation spiked again as uneven rainfall in March-May that year affected tomato output and heavy rainfall in May disrupted its transport. Every year of above-normal monsoon has been followed by a spike in food inflation.
The price increases caused by such disruptions often correct sharply but still bring uncertainty to prices and affect perceptions of inflation. “This possible incidence of unseasonal rainfall associated with La Nina during the harvest months of October-November also needs a close watch,” said Kanika Pasricha, chief economic adviser, Union Bank of India.
