In its second estimate, the Indian Meteorological Department has forecasted that the southwest monsoon is likely to be 7% below normal as compared to its first forecast of 5% below normal monsoon. In terms of spatial distribution, the northwest region is likely to be the worst hit with 15% below normal rainfall. The region accounts for about one-third of rice and coarse cereals production and one-fourth of pulses and oilseeds. However, the damage may not be that serious as 66% of the agricultural land in this region is irrigated as compared to the national average of 48%.
The reservoir levels are healthy at 57% above the 10-year average which would bode well for kharif sowing. Even food price inflation should be manageable if the government proactively releases food grains from its excess stocks and eases import restrictions and duties, especially for edible oils and pulses.
In fact, data over the past decade show that poor monsoons have not necessarily caused high food price inflation. In 2002 and 2004, while cumulative rainfall was down 19% and 14% respectively, large scale disbursement from the government's food stocks kept WPI food inflation under control at 1.8% and 2.6% respectively. In contrast, recent periods of normal rainfall and strong foodgrain production have led to high inflation.