Delayed Monsoon Leads To Serious Concerns

The monsoon season is an integral part of the India growth story and plays an important part in the growth of India Inc too. Rather, most of the agricultural growth in India is dependent on the monsoon.  A majority of the factors which are important for the economy such as food prices and agricultural growth (the rural areas have been a major driving force of India Inc) are driven by the monsoon.

In the current scenario of turbulent times for the markets, an average monsoon rainfall was expected to be the factor providing some relief. However, the rain god has not supported the markets yet. At least the figures show that. The monsoon was delayed by a week and till date the figures are not quite encouraging. According to the Indian Meteorological Department (IMD), the actual rainfall has been way below the average. As on June 13, 2012 the average rainfall was 15.30 mm as against the normal rainfall of 30.6 mm. This is 50 per cent lower rainfall being witnessed as compared to the normal rainfall.

If we get into the details, there are only two regions which experienced excess rainfall. These are sectors like Jammu & Kashmir and Andaman islands, which hardly make any impact on the overall agricultural produce.

There are three sectors witnessing normal monsoon. These are western Rajasthan, coastal Andhra Pradesh and the north-eastern state. There are 14 sectors that have witnessed a defiant (20-59 per cent less than normal) rain and there are 14 sectors with scanty rain (negative 60-99 per cent). So a majority of the areas that matter for the agri produce has witnessed lower rain.  The worrisome part is that the scenario has only worsened since the last calculation was done on June 6, 2012.

We feel that if the rain scenario remains the same there are going to be other difficulties ahead. First, the vegetable and fruit prices are expected to move northward and thereby keep the inflation higher. Already the RBI has maintained its hawkish stance in its June 17 meeting and this event would not allow the RBI any breather in the next meeting.

The IMD has maintained that despite the delayed start, the monsoon is expected to be normal in 2012. This is the only hope for the Indian equity markets. Else be ready for a difficult scenario going ahead.