As Crucial Season Arrives, What Lies Ahead For Indian Economy?

India reels under severe heatwaves and witnesses record-breaking temperatures across the nation, all eyes are peeled on the south-west monsoon, which has debuted in Kerala and the north-east. Healthy, timely and well-distributed rains can lift agriculture incomes by bolstering rural demand, which was impacted in the past fiscal and is currently showing some signs of revival.

Crisil Ratings in a report has said that robust crop output can control food inflation that has been hovering above 8 per cent for six months. Combating food inflation, with non-food inflation already being low, can provide policy room for interest rate cuts. 

The Southwest Monsoon hit the coast of Kerala and advanced into parts of northeast India from Thursday, two days earlier as the usual date of the onset is on 1 June.  This year, Kerala experienced widespread pre-monsoon rains. In 2023, rainfall over India as a whole during the monsoon season (June-September), was 94 per cent of its long-period average. 

Earlier, the India Meteorological Department (IMD) reaffirmed its April prediction of above-normal rainfall for the 2024 southwest monsoon, forecasting rainfall at 106 per cent of long period average (or LPA) between June and September, with a model error of ±4 per cent.

In its 9 April forecast, Skymet, a private weather forecaster, too, had predicted rainfall at 102 per cent of LPA for the season. The weakened El Nino conditions are expected to allow La Nina conditions to develop in the latter part of the monsoon.

La Nina, following El Nino, generally favours the Indian monsoon, according to data from the past 72 years studied by the IMD. “At present, the Indian Ocean Dipole is neutral and likely to turn positive (benefitting Indian monsoons) in the latter part of the season,” the Crisil report stated. 

However, IMD’s update on the regional spread also reaffirms possible worries for India’s east and north-eastern parts, which are expected to receive below-normal rainfall. In contrast, northwest India sees a higher probability of normal rains amid the forecast of above-normal rains in central India and the southern peninsula.

Skymet’s more granular forecast predicts a risk of deficit rains in Bihar, Jharkhand, Odisha, and West Bengal during the peak monsoon months of July and August, while the northeast, in general, is expected to see “less than normal rains during the first half of the season”, the agency noted. It expects good rains in the south, west and northwest regions, and adequate rainfall in Madhya Pradesh and Maharashtra.

The IMD forecasts normal rains in June, but above-normal temperatures in most parts of northwest and adjoining areas of central India (charts 2 and 3) that could cause some disturbance. “Rainfall in July and August is crucial for agriculture, as most sowing activities take place during this period. However, the fields are ploughed and sowing begins in June. Above-normal temperatures predicted in the month could impact the availability of labour or the ability to work under extreme conditions,” the agency added in the report.

Notably, high temperatures also bring other challenges such as further depletion of reservoir levels—which are already 24 per cent below capacity—due to faster evaporation.

The Scorching Heatwave: Lessons From 2023

The Crisil report also mentioned that areas and crops that see weaker rains for a second straight year could suffer more than others. In 2023, despite a normal overall southwest monsoon, its uneven distribution across states impacted many crops. Of the states expected to receive deficit rains this year, Jharkhand, Bihar, West Bengal and Odisha require monitoring as they were impacted last year as well. 

Rice, tur and coarse cereals warrant a closer watch as last year’s uneven rains impacted production and pushed up inflation rates for these crops. Rice, for instance, saw an average inflation rate of 12.2 per cent in fiscal 2024, tur 33.4 per cent and coarse cereals 10.9 per cent in 2023-24.

This year, April and May have already witnessed more than the usual number of heatwaves, and June is expected to tread this path, too. While rains are predicted to be normal in June, the IMD is also expecting above-normal temperatures in most parts of northwest and adjoining areas of central India.

The spell of heatwaves this year began in April in the eastern and southern parts of India, while May has mostly seen heatwaves in Northwest and central India. This year’s heatwave occurs outside the cropping season for major crops, unlike in 2022, when it hit during the wheat harvesting period in March. 

“However, the impact could be borne by vegetables grown in summer, which could be mitigated by farmers shifting their cropping patterns; or even growing heat-resistant crops such as millets in the current summer period,” according to the Crisil Ratings.

On Sunday, Prime Minister Narendra Modi chaired a meeting to review the situation of the ongoing heat wave in the country and the preparedness for the onset of monsoon.

PM Modi was briefed that as per IMD forecasts, the heat wave is likely to continue in parts of Rajasthan, Gujarat and Madhya Pradesh. This year, the monsoon is likely to be normal and above normal in most parts of the country and below normal in parts of Peninsular India. 

Modi has instructed that proper drills for preventing and handling incidents of fire must be done regularly. Fire and electrical safety audits of hospitals and other public places must be undertaken regularly. He also said that regular drills for the maintenance of firelines in forests and productive utilisation of biomass must be planned.

Meanwhile, according to the CareEdge Ratings, expectations of a normal monsoon bode well for overall consumption demand. However, monitoring the spatial and temporal distribution of the monsoon will be important.