The India Meteorological Department (IMD) has forecast a “most likely to be above normal” southwest monsoon this year. Rainfall over the country during June-September is expected to be 106 per cent of the “normal” long period average for this four-month season. The optimism is based on most global climate models indicating a weakening of the current El Niño conditions to “neutral” in the first half of the monsoon and then developing into a La Niña during the second half.
El Niño — an abnormal warming of the central and eastern equatorial Pacific Ocean waters towards South America — is generally known to suppress cloud formation and rainfall activity in India, while La Niña has the opposite effect. La Niña apart, the IMD is deriving hope from “positive” Indian Ocean Dipole conditions — warmer temperatures in the Arabian Sea waters relative to that in the eastern Indian Ocean — developing, again during the latter part of the monsoon season.
But for both the government and the Reserve Bank of India, there is an immediate concern. It has to do with retail food inflation, which, at 8.5 per cent year-on-year in March, was higher than the 4.9 per cent increase in the general consumer price index. With government wheat stocks, at 7.5 million tonnes on April 1, depleting to a 16-year-low for this date and subpar production in most rabi crops, food inflation may remain sticky. That practically rules out any policy interest rate cuts. Everything, therefore, hinges on the monsoon and a bumper kharif harvest about six months from now. The government’s options are limited: It has done both right (slashing import tariffs on pulses and edible oils) and wrong (banning/curbing exports of wheat, rice, sugar and onions, besides imposing stocking limits). The one thing it could do is to abolish the 40 per cent import duty on wheat.
