Normal monsoon can boost sagging consumption growth: RBI

MUMBAI: The Reserve Bank today said private consumption, which has been declining due to sagging economic growth, will go up if there is normal monsoon this year.

"The forecast by Met Department of a normal monsoon raises hope that consumption may improve," the apex bank said in its Macroeconomic and Monetary Developments report on the eve of annual policy announcement.

A pick-up in private consumption can help ease inflation further during the first half of the fiscal, it said.

The report blamed the dip in private consumption to the fall in GDP growth, which is expected to come at a decadal low of 5 per cent in FY13.

The report, however, gave a caveat that the risk of a sub-normal monsoon to growth and inflation cannot be ignored altogether for 2013-14 despite the forecast of a normal monsoon.

It said, last fiscal the deficient rainfall affected the summer crop sowing and also production in both foodgrain as well as commercial crops. However, the recovery in rainfall post-September is expected to help the winter crop as the soil moisture levels go up, it said, adding production of pulses is expected to touch a record high in 2012-13.

The staple wheat is likely to suffer due to a decline in area covered under the crop, the RBI report said.

The overall decline in production in foodgrain will only be 3.5 per cent, the report noted.

The current stock of foodgrain at 59.7 million tonne as of March is sufficient to meet the buffer requirements under various poverty alleviation schemes, it said.

However, the report also advised better management of the food stock to dampen cereal inflation.