Monsoon starts weak; points to the return of food inflation

The Meteorological department’s prediction about a deficit monsoon seems to be correct as per the initial trends at the Monsoon’s entry point – Kerala. Typicl strong and widespread rain remained elusive during the initial week in the state.

The Meteorological department changed its monsoon prediction from below normal to deficit for the country. This deficit prediction comes when the agriculture sector has already received a set back after the weak performance of the sector during the last two quarters.

 Last year, India’s agriculture sector recorded nearly zero growth though the manufacturing sector has recovered strongly. Agricultural GDP growth was just 0.2 percent during 2014-15 and most importantly, the sector has registered negative growth in the last two quarters of the financial year.

The weak monsoon trend is not a good news for the economy on food inflation front. During the last year, retail price inflation driven CPI has declined consistently. Such a welcome development on the price front is rarely seen in India. The low level of retail inflation was mainly due to sharp decline in food inflation.

But the threat of a deficit monsoon internsifies the probability for the return of food inflation. The macroeconomic recovery provided by low inflation may not happen next year.

So far, interior and hilly parts of Kerala which usually gets intensive rain in the initial period of monsoon has recorded only sluggish rainfall, that also only on June 2nd.

Farming community elders of the region warned weak monsoon highlighting the June first week uncharacteristic rise in day time temperature. Similarly, strong rains during the summer season in April –May also indicate the probability of weak monsoon according to them. 


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