The India Meteorological Department (IMD) has predicted below normal monsoon rains for India this year, citing the potential emergence of El Nino conditions. This could significantly impact the country's agriculture-dependent economy.
The Brihanmumbai Municipal Corporation (BMC) has announced a 10 per cent water cut across Mumbai starting May 15, citing concerns over a below-normal monsoon forecast due to the El Nino weather pattern. The current water stock in the city's seven lakes is expected to last until July 6.
The El Nino impact on the Indian monsoon typically manifests by way of extended break in rainfall.
We should be prepared for any impact of the dreaded weather pattern.
A private sector weather forecaster, Skymet, and some global forecasters have already issued warnings for this year that this could happen.
If the weather phenomenon hits India, impact will be felt across sectors; be cautious on stocks based on rural consumption.
Senior officials of the India Meteorological Department said they were now more confident that El Nino would indeed appear during the second half of the southwest season, compared to April when the last official forecast was made.
The El Nino weather phenomenon will bring drier winter weather to Indonesia, India, Mexico, Central America and northern Brazil, US government weather forecasters said.
Less-than-expected rainfall and a poor spatial distribution, experts say, can rekindle fears of a rise in food and fuel inflation that can have an impact on the RBI's monetary policy. The fear of less than optimal rainfall due to El Nino this year, analysts believe, is the biggest short-term risk for the markets, which they said has not been fully priced in yet by them. Monsoon set over Kerala on June 08, a week later than its scheduled date.
"This year, the Southwest Monsoon is likely to set over Kerala on May 31 with a model error of four days," the India meteorological department said on Wednesday.
El Nino, which refers to warmer-than-average sea surface temperatures in the central and eastern tropical Pacific Ocean, will likely to keep CPI inflation up at 8-10 per cent in the second half of 2014 and will pose a 50-70 basis point risk to this fiscal's growth expectation, the report by financial services major Bank of America Merrill Lynch said.
El Nino, an anomalous rise in sea surface temperature off the Peru coast, has been observed to often cause the Indian monsoon to flounder, resulting in poor rainfall. Nearly 60 per cent of agricultural land is wholly rain-dependent.
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An El Nino is a temporary change in the climate of the Pacific Ocean, in the region around the equator.
Officials in the weather department said the monsoon is expected to be below normal because of the El-Nino effect.
Wholesale price-based inflation eased to a nine-month low of 4.68 per cent in February, while retail inflation slowed to a 25-month low of 8.1 per cent.
Rainfall in August is predicted to be below normal (less than 94 per cent of LPA), but the situation is expected to improve comparatively in September, the IMD said.
The government must expand the farm insurance cover and advice banks and financial institutions to settle crop insurance claims in the drought-hit areas without delay.
IMD will present its month-wise and region-wise forecast in June.
The India Meteorological Department in its first forecast for 2014 had said southwest monsoon will be below normal at 95 per cent of the long-period average.
El Nino is often associated with below average warmer, dry weather across Asia Pacific region.
If El Nino condition affects the monsoons, as is being forecast by foreign agencies, it can slow down the economy to 5.2 per cent next fiscal from a projected 6 per cent.
The Indian Met Department has predicted a below normal monsoon.
'A weak monsoon always spells disaster. But it's too early to have a pessimistic view.'
A new study reveals that global warming has accelerated significantly since 2015, even after accounting for natural climate fluctuations. Researchers express concern that current efforts to curb emissions are insufficient to meet the Paris Agreement targets.
A rise in farm sector is estimated to raise demand for industrial goods and services, it added.
About 60 per cent of net sown area of the country is rain-fed. With every one per cent deficit in rains, the country's gross domestic produce falls by 0.35 per cent.
The same development would benefit the progress of the north-east monsoon, also known as the 'reverse monsoon'.
Steps to improve governance, instill confidence in the government machinery and streamlining function across the different ministries are also important to feed the positive mood, the DBS report added.
'If because of El Nino, the monsoon is affected adversely in the current year, naturally it will affect income projections and consequently Budget numbers.'
A poor monsoon could drag overall economic growth and compound the impact of the West Asia conflict on the Indian economy.
'Geopolitical risks and their impact on oil prices, if any, are another concern for global markets, particularly for India.'
In the coming months, globally as well as in India, rice might remain a hot potato.
India is likely to witness a mixed temperature pattern along with wetter-than-usual conditions in May, with the India Meteorological Department (IMD) indicating that rainfall across the country is "most likely to be above normal" at over 110 per cent of the long period average (LPA).
Monsoon revival over weekend likely, but second-half rainfall may be muted. If the rains become scarce after mid-August, the standing kharif crops might be impacted
Even if there is an early agreement on a cessation of hostilities in West Asia, the price shock will not go away easily, points out A K Bhattacharya.
'Monsoon is the pran (life) of our water system.' 'A weak monsoon will have a very negative impact on crops and people's lives.'
The finance ministry on Thursday raised concerns over the possible impact of El Nio conditions on India this year, saying if recent forecasts came true, the country could see lower agricultural output and higher inflation. "Some meteorological agencies predict the return of El Nio conditions in India this year. "If these predictions are accurate, then monsoon rains could be deficient, leading to lower agricultural output and higher prices," the ministry said in its monthly economic review.
Domestic-focused agricultural chemical (agrochem) companies could face near-term headwinds, given the worries on the El Nio effect on monsoons, higher inventory, and pressure on margins. Some of these were reflected in the October-December quarter (third quarter, or Q3) results of companies and may impact them in the current quarter (fourth quarter, or Q4) as well. Nuvama Research pointed out that the sector witnessed mixed performance during the quarter as global agrochem and domestic fertiliser companies maintained growth momentum, while adverse agronomical conditions and excess channel inventory weighed on domestic market volume offtake.
The Reserve Bank of India (RBI) Governor Sanjay Malhotra is now confronting the classic growth-inflation tradeoff, a situation exacerbated by the West Asia war, which threatens to end the 'goldilocks period' of low inflation and robust growth.
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