India received normal rainfall at 1% above the long period average (LPA) during June 1 – July 20. Barring the east and northeast, other regions received above-normal rainfall. Rainfall improved in northwest India, with cumulative levels being 6% above LPA as on 20 July. But sub-divisions of Gujarat region and Saurashtra & Kutch received deficient rainfall which was cumulatively 38% / 52% below LPA. This bodes well for the economy as also India’s equity markets
A total of 69.3 mn hectares were sown for kharif crops by July 22, 2016, which is 3.3% higher than the area sown in the year-ago period. While sowing started on a weak note and was down 5.9% YoY by July 8, good rainfall in the first two weeks of the month has helped bridge the deficit, says Religare Research.
According to it “Area sown for kharif pulses surged by 39.4% YoY to a record 9 mn hectares by July 22. This is a very high number, given that (1) average area cultivated for pulses over the last ten years during the entire kharif season stood at 10.7mn hectares (10-year high: 12.3mn hectares), and (2) there is time left for sowing to rise further. A sharp rise in market prices (due to a drop in output in last 2 years) is likely to have encouraged farmers to grow more pulses in the ongoing kharif season. Wholesale prices of arhar / moong / urad averaged at Rs. 8,901 / Rs. 8826 / Rs. 10,798 per quintal in Q1FY17, significantly higher than the announced MSPs of Rs 5,000 - 5,300/quintal.”
Religare believes that, “If the trend in sowing of pulses continues, India could witness a record output of kharif / pulses, which is positive given that the output of pulses has declined by 11.4% over the last two years and retail inflation in pulses has stood at 20%+ over the last 12 months.
The area sown for rice and coarse cereals was up 0.4% and 3.6% YoY respectively by July 22. Nevertheless, area sown for cotton fell by a sharp 12.7% YoY due to scanty rainfall in the Gujarat region, which accounts for ~20% of India’s total cotton production. A total of 14.9mn hectares were sown for oilseeds by 22 July, up 4.3% YoY. Oilseeds’ sowing, which was down 18.7% YoY as on July 8, has picked up sharply over the last two weeks – a positive given that the output of kharif oilseeds had dropped by 10.4% to a six-year low of 17.2mt in the preceding year.
To sum up, India received normal rainfall at 1% above the long period average (LPA) during June 1 – July 20. Barring the east and northeast, other regions received above-normal rainfall. Rainfall improved in northwest India, with cumulative levels being 6% above LPA as on 20 July. But sub-divisions of Gujarat region and Saurashtra & Kutch received deficient rainfall which was cumulatively 38% / 52% below LPA.
Good rainfall in the first half of July has also boosted reservoir levels, with water levels in 91 major reservoirs of the country touching 34.2% of their full total storage capacity as on July 21 from just 18% two weeks ago. This is only slightly lower than the average level of 36.5% as on July 21 over the last five years. The improvement in water levels would help cater to irrigation needs for Rabi crops and aid hydropower generation, which has declined in each of the last 10 months.
This bodes well for agriculture as also the economy and its positive impact is likely to reflect on the equity markets also.
.jpg)
.jpg)