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Monsoon and the good news for inflation
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Context
The southwest monsoon season, which started poorly, has shown significant improvement over the past months. After an initial deficit, rainfall has surged above normal levels, positively impacting agriculture and water resources. This shift is expected to have broader implications for food inflation and agricultural productivity.
Monsoon Performance and Agricultural Impact
- Improved Rainfall: After a deficient start with June rainfall 10.9% below average, July and August recorded above-normal precipitation, with current rainfall 26% above normal. The cumulative surplus for the season stands at 6.3%, improving the overall monsoon performance.
- Increased Sown Area: The well-distributed rains have increased the sown area for key kharif crops, including paddy, pulses, maize, and oilseeds. However, cotton acreage has declined due to factors such as pest attacks and limited yield protection technologies.
- Reservoir Levels: Major reservoir dams are filled to 64.7% of their capacity, surpassing last year's 60.8% and the 10-year average of 53.7%. This reflects a positive impact of the monsoon on water resources.
Future Outlook and Economic Implications
- La Niña Anticipation: Weather agencies predict a La Niña phase, which generally boosts rainfall. This is expected to benefit the upcoming rabi cropping season and counteract the adverse effects of the recent El Niño, which had previously suppressed rainfall and contributed to higher temperatures.
- Food Inflation Relief: The ample monsoon and absence of heat waves are likely to ease food inflation, which had been above 8% year-on-year. With a potential bumper kharif harvest and stable global prices, food inflationary pressures might reduce, providing room for policy adjustments.
- Policy Implications: Reduced food inflation could lead to the lifting of export and stocking limits on cereals, sugar, and pulses. The government may also keep the import window open for major food commodities, enhancing food security and stabilizing prices.
Mains Question
Discuss the impact of the monsoon's performance on agriculture and food inflation in India. How do weather patterns like El Niño and La Niña influence agricultural productivity and economic stability?
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