India's June-September monsoon rains are a key factor for global commodities
markets as they influence output of various crops in India, which is among the
world's leading producers and consumers of wheat, rice, sugar and edible oils.
Farming constitutes about a fifth of the country's gross domestic product (GDP),
where about 60% of people live in rural areas.
The seasonal rains usually start in the southern Kerala coast on June 1 and
cover half the country by the first week of July.
About half of India's farm output comes from crops sown during the four-month
long monsoon season.
The increased soil moisture from the rains is important too for key winter crops
like wheat and rapeseed.
The following are facts on the monsoon and its impact:
Crops:
Rice: Indian farmers plant paddy at the start of the monsoon
season. The key areas for rice are the eastern and southern regions.
The crop is heavily dependent on rains for irrigation. A bumper harvest last
year means India has ample stocks. But exports are still banned -- apart from
select non-basmati grains -- and normal rains could prompt the government to
ease curbs on overseas sales. Any decision is likely to come after end-July,
when the monsoon impact is clearer.
Soybean: A vital crop for the world's top importer of edible
oils. Higher oilseed output would rein in the growth of edible oil imports and
increase oilmeal exports.
Sugarcane: The world's top sugar producer after Brazil could
allow exports of the sweetener in the next season from October 1 if rains are
favourable for output. India has said exports of 500,000 tonnes can be made from
in the current 2010/11 (Oct-Sept) sugar year.
Others: Corn, lentils and cotton, important crops in western
and central India, also depend heavily on the seasonal rains. India remains a
net importer of lentils.
Irrigation, power
Monsoon rains replenish reservoirs and increase ground-water levels, allowing
better irrigation and higher generation of hydropower.
About 40% of India's arable land has irrigation facilities. The rest depends on
the monsoon rains.
Higher rainfall levels can also reduce demand for diesel, used to pump water
from wells for irrigation when rainfall is scant.
Economy and markets
India is largely self-sufficient in major foodstuffs such as rice and wheat, but
drought can send the country to international markets, as it did in 2009 when
India had to import sugar, sending global prices to record highs and pushing
inflation up.
Ample monsoon rains lift domestic demand, as higher farm output increases the
incomes of rural people, who account for about two-thirds of India's 1.2 billion
population.
Higher demand for goods and services can boost economic growth. Also, inflation
could ease because a better supply of crops would lead to lower prices and take
the pressure off the government to step in with fiscal measures and extra
subsidies.
A stronger economic outlook can lift sentiment in equity markets, particularly
of companies which sell products in rural areas, including consumer goods and
automobiles.
Source : moneycontrol.com