The impact of weak monsoon so far this year on India's farm production and economy is likely to be limited, the central bank said, as rainfall levels have improved considerably over the past one month.
In its annual report for 2013-14 released on Thursday, the RBI said even if the rainfall is normal in rest of the monsoon season (June to September), some deficiency will stay but it will not have a debilitating impact on the economy.
"The adverse impact of lower rainfalls on growth, inflation, fiscal and trade deficits is expected to be limited as on the current reckoning the deficiency in quantitative and qualitative terms is likely to be much less than that in 2009 (a drought year)," the RBI report said.
As of August 13, the all-India cumulative rainfall deficiency stood at 18 per cent of the long period average (LPA) as against an excess of 12 per cent in the same period last year.
There has been a marked improvement in the monsoon, which is crucial for agriculture - a source of livelihood for a majority in the country - since July 13 when the deficiency was a whopping 43 per cent.
The report said the area sown under kharif crops was 2.3 per cent lower than the normal but 8.9 per cent higher than the 2009 drought year.
Moreover, the difference between kharif (summer) and rabi (winter) crops have evened out in the past few years, thus eliminating a massive impact on food production due to rainfall shortfall this season.
"On an average basis, for the last five years, rabi crops accounted for 50.7 per cent of total foodgrains output," RBI said, adding "based on the sowing data, it appears that the drop in output may now be restricted mainly to coarse cereals and pulses."
As such, the odds are that agriculture and allied sector could make a positive contribution to overall growth as was the case even in 2009-10, the report said.
The RBI said current water levels in reservoirs are a source of comfort. As of August 13, 85 major reservoirs had 14 per cent higher water levels than the average over the last 10 years, though it was 12 per cent lower than last year's level on the comparable date.
It said in case monsoon weakens again in the rest of the season, there was a risk of modest adverse impact on power production due to fall in water levels of reservoirs.