Skymet: Brace for a below-average monsoon

While the RBI was expected to cut the repo rate by 25 basis points due to low inflation on Thursday, the forecast of Skymet on Wednesday may make the central bank think twice before going ahead with the previous calculation as bad monsoon may translate to inflation in food prices in the near future

Monsoon forecast by Skymet

New Delhi: Skymet, a private weather forecaster, has predicted a below normal monsoon from June through September. It expects this year’s monsoon to be 93% of the long-term average. According to the weather forecaster, the chances of below-normal rain is 55% this year. El Nino is responsible for these.

Monsoon, a climatic feature unique only to India, strikes the southern tip of Kerala every year around the first week of June and retreats by September through Rajasthan. The whole of India’s agriculture is dependent on it. It’s the lifeline for the whole farming sector. Farming output makes up just less than 14% of India’s GDP, but the sector caters to more than half of the country’s 1.3 billion population when it comes to employment.

A strong El Nino, marked by a warming of the sea surface on the Pacific Ocean, might cause severe droughts in many regions adjoining the western Pacific Ocean like Australia, Southeast Asia and India while drenching other parts of the world such as the US Midwest and Brazil.

Jatin Singh, the managing director of Skymet has this to say: “The Pacific Ocean has become strongly warmer than average. The model projections call for 80% chance of El Nino during March-May, dropping to 60% for June to August. This means it is going to be a devolving El Nino year, though retaining threshold values all through the season. Thus, monsoon 2019 is likely to be below normal.” Not to forget that the emergence of a strong El Nino triggered back-to-back droughts in 2014 and 2015.

The forecast pf Skymet comes a day before the Reserve Bank of India (RBI) is set to announce its first interest rate decision for the fiscal year 2019-20. It is expected that the RBI would cut the repo rate by 25 basis points due to low inflation. But the central bank’s inflation outlook could also go wary by the risk of sharply higher food prices if the monsoon season this year defaults.

The annual retail inflation was just 2.57% in February following five months of deflation in food prices, and the RBI has projected a rise to 3.9% by the end of December. But that could change quickly if the monsoon fails or global oil prices surge.