India: Monsoon worries abate – Standard Chartered

Standard Chartered analysts note that after a weak start, the monsoon has recovered in recent weeks in India as cumulative rainfall since the start of the season has improved to -6% of the long period average (LPA) versus -33% as of end-June.

Key Quotes

“On a monthly basis, rainfall was 5% above LPA in July, and the Indian Meteorological Department (IMD) expects it to be close to LPA in August and September. Overall, the probability of a near-normal monsoon (i.e. c.-4% of LPA) for the fourth consecutive year has increased.”

“The recovery in the monsoon has been led by the central and northwest regions, which account for 65% of agricultural output. However, reservoir levels and crop sowing trends need to be closely watched.”

“The distribution of reservoir levels is crucial – these are currently lower than last year as well as historical trends, with a wide disparity at the state level.”

“The delayed monsoon has adversely affected crop sowing, which is currently at the lowest levels since 2015, on slow progress in crops like rice and pulses. Our analysis indicates that factors including a prudent fiscal policy, limited hiked in minimum support prices, benign growth environment, adequate food stocks and subdued commodity prices could contain the impact of an inadequate monsoon on inflation. However, a lower crop output could significantly impact GDP growth.”