Inflation: Whiff of rains & govt on cloud 9

NEW DELHI: At long last, some good news on the inflation front. The initial forecast by the India Meteorological Department (IMD) for the crucial south-west monsoon (June-September) is ���near normal���. The weatherman���s forecast, with a margin of error of 5% on either side, says that the total rainfall across the country would be 99% of the long period average (LPA). In meteorological parlance, the monsoons are described as ���near normal��� if rainfall is 96%-104% of the LPA. The IMD will refine this forecast in June, using fresh data.

India���s agricultural produce still depends on good rains. Given that a good part of the inflation, which has been eroding people���s real income and giving nightmares to policymakers, has come from real and perceived shortage of farm produce, normal rainfall is good news. It could soften the government and RBI���s policy measures to rein in inflation. Incidentally, agriculture minister Sharad Pawar told Parliament on Wednesday that the government could consider banning futures trade in essential commodities.

The monsoon, incidentally, exceeded the average by 5% last year, despite initial forecasts of a 5% shortfall. In view of poor forecast record, the IMD recently changed the weather and monsoon forecast model, making it more detailed and relevant for rainfall distribution in specific areas.

This year���s forecast utilises both the statistical and dynamic models to arrive at the estimates as the earlier method of relying on the statistical model alone led to inaccurate predictions. ���The statistical model works well only in northwest, central India, northern India and western India while the dynamic model works well for peninsular India and the North East,��� minister of state for science and technology Kapil Sibal said. Briefing the media on the IMD���s long-range forecast of the coming monsoon, he said: ���A good monsoon means good growth. Increased farm output means that prices will fall. Increased water availability will increase farm income.���

The UPA government, of course, will be hoping that the met���s prediction is on target as overheated prices threaten the political gains projected from the Budget���s Rs 60,000-crore farm loan waiver. Despite the government���s repeated promises on a beyond-the-monsoons infrastructure, 60% of the country���s cultivated land still depends heavily on rains for a good output.

The government���s food stock is currently over the April 1 buffer stocking norm, but a calamity can tighten supplies. Mr Pawar has already signalled the possibility of wheat imports this year too even as the government faces an ���official��� shortage of 1-1.5 million tonnes of rice. And high global prices of food staples, edible oil, pulses and horticulture produce have had marked impact on local prices. The result is that inflation (the highest in the last three years) remains the government���s biggest worry.

But commodity analysts are wary of cheering the impact on agricultural produce at least till the June forecast, which would also indicate spatial rainfall distribution in the crucial sowing season of July. Besides rains, the government���s agri policy this year too will have a key role in the farmer���s decision to sow. Already, sugarcane acreage is expected to shrink this year. But edible oilseeds��� acreage was earlier expected to rise, thanks to the government���s objective of increasing domestic dependence on consumption from 30% to 60%.

However, in a bid to slash prices, import duty on crude edible oil was scrapped recently while that on refined oil duties was cut drastically. That may also impact the farmer���s decision to plant oilseeds. A likely increase in wheat acreage on expectations of a support price on a par with global prices fell through with the government refusing a bonus over the Rs 1,000/tonne MSP.