Although the South-west monsoon rainfall was above normal at 105% of Long Period Average (LPA) in June-July 2023, the temporal and spatial distribution was quite uneven. The actual volume of rainfall at 114% of LPA in July 2023 overshot the IMD’s forecast of 94-106% of LPA for the month, which compensated for the sub-normal rains seen in June 2023 (90% of LPA).
The India Meteorological Department (IMD) expects normal rainfall in Aug-Sep 2023 (94-106% of LPA) amid a below normal forecast for August 2023 (<94% of LPA). Given the 5% surplus in June-July 2023, the 2023 monsoon rainfall appears likely to end close to the LPA (100%), if the actual rainfall in H2 comes in at 94% of the LPA, i.e.the lower end of the IMD’s expected range.
While witnessing a seasonal uptrend, the all-India reservoir storage of 48% of live capacity at full reservoir level as on July 28, 2023was lower than the year-ago levels. Nevertheless, it remains comfortably above the historical levels of past 10 years.
The intense rainfall spells in July 2023 have aided in narrowing the year-on-year (YoY) gap in the pace of kharif sowing to 0.3% as on July 28, 2023 from 8.7% as on July 7, 2023. However, the YoY decline in pulses remains significant at 11.3% amid lag in sowing in Karnataka and Maharashtra.
The IMD’s forecast of below normal rainfall in Aug 2023 suggests that the kharif sowing may not gather pace significantly, particularly for pulses. Adequate rainfall in the month would be critical for a timely completion of sowing and favourable crop yields.
If kharif sowing trails last year’s levels, we see a downside risk to our GVA growth forecast of 2.5% for agriculture, forestry and fishing for FY2024 (+4.0% in FY2023).
The ongoing vegetable price shock is likely to temporarily push the CPI inflation above 6.0% mark in July 2023. However, the spike in prices of some vegetables may be transient, reversing after the next harvest.
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