It’s still raining, so why isn’t anyone worried?

As such, the water reservoir level is not high enough. Data published on 2 September from the Central Water Commission shows that the live storage available in 130 reservoirs in India is about 65% of their total live storage capacity. Available storage is 80% of last year’s storage for corresponding period and 94% of last ten years’ average storage.

The agricultural sector of India depends heavily on the timely arrival and spread of rainfall during the monsoon season. By extension, the income and, therefore, demand of the rural economy are also guided by rainfall. Experts are not too worried about the rains right now, they say that there are some relief factors.

While the rainfall distribution in 2021 has been poor, economists say it has been largely supportive, with most major food-producing states getting the normal amount. The sowing of the crop for the Kharif season has also been remarkable.

Further, the India Meteorological Department (IMD) has said that rainfall in September is likely to be above normal (more than 110 per cent of the long period average).

Gaura Sen Gupta, Economist, IDFC First Bank, wrote in a report on September 2, “The additional rainfall in September is expected to reduce the losses for the entire season (June to September) to 4.8% from the current deficit of 9%. ” Encouragingly, this month has started well.

To be sure, in 2021, we are in a far better position than we have seen in a few years in the past decade.

“According to our irrigation coverage and agricultural GVA (Gross Value Added) weighted rainfall indicators, India’s rainfall deficit is only 3% below normal and much better than the deficit of 17-18% in dry years (CY14 and 15),” analysts said. JM Financial Institutional Securities Ltd said in a September 1 report.

“The erratic rainfall pattern in July-August ’21 impacted agriculture-related investments, including tractor sales, but the overall growth trend is likely to revert, as our investigations show,” the report said. “

What about food inflation? “Going forward, excluding any extreme climate shock, food inflation is expected to be contained in the mid-single digits in 2HFY22, mainly due to a weak outlook on cereals and vegetable inflation,” say analysts at JM Financial.

Still, how the September rains shape up needs to be closely monitored. Capital Economics in its India Economics update said that any adverse outcome would impact agricultural production.

“There has been a steady decline in the production of monsoon crops (kharif) as a share of total agricultural production, from 60% in 1990 to less than 50% now. The share of agriculture in GDP has also fallen, from 30% in 1990 to 15% now,” the firm said.

The result is that the health of the fields will be determined not only by the south-west monsoon, but also by the north-easterly winds.

“While the spatial distribution of rainfall and sowing trends both indicate a limited impact on kharif sowing, there could be a risk to rabi crops if the reservoir level further depletes. Good reservoir levels are essential for rabi crops, which are mostly dependent on irrigation facilities.”

As such, the prospects of India’s rural economy may depend on how wet September is.