Even though Indian Meteorological Department (IMD) has revised downwards the monsoon forecast for June-September period to 87% from 95% of long period average, early signs indicate that the country could end up with normal food production in rice and pulses. However, below average production is seen in groundnut, soybean, black gram and maize either due to scanty rains or dry spells in these crop-sowing regions, especially south Gujarat, west Madhya Pradesh, pockets of Karnataka and Marathwada region.
According to N Chattopadhya, deputy director general, Agrimet Pune, with monsoon reviving during the first week of July, the rice-sowing pattern in central India, east and north-east and larger part of the peninsula improved remarkably.
However, dry spells in Marathwada, south Gujarat and western Madhya Pradesh could end up with a mixed basket of normal output in rice and pulses on the one hand and below average production in soybean, black gram, groundnut and maize on the other.
Economists and bankers are, however, skeptical on whether the current levels of sowing indicates any increase in food supplies in the months ahead, or translate into softer rate regime. "We still have two months more to go before concluding the monsoon has been deficient to the extent estimated by the IMD. It could be worse." said an economist at a bank.
The Reserve Bank of India (RBI) has often indicated that consumer price inflation needs to be addressed first before toning down key rates and it appears it won't in the near future.
"The RBI may not bring down rates unless the fall in consumer price index (CPI) is consistent over three to four months," said UR Bhat, managing director at Dalton Capital Advisors.
Large portion of the food basket comprise of wheat, rice and pulses, to that extent the country may end up the season with satisfactory stocks going by IMD estimates.
"The RBI focus is on core inflation which does not include fuel and food. Food is a supply side constraint that needs to be addressed by the government and not through monetary policy," said a senior banker at a government bank.
"The oil imports has been taken care of by factoring in the cost to retail price, dependence on monsoon has reduced dramatically over the years due to better irrigation facilities." said the banker.
If minimum support price has not been changed dramatically, it indicates either the farmer is getting a better price elsewhere or foodgrain production is bad. Why aren't prices of rice and wheat not coming down? he asked.
According to economists and bankers, the news will not bring in any immediate respite in inflation levels or interest rates though the outlook for consumer price index overall remains that of tapering.
"The market looks for facts. Do our farmers have the money for second and third seeding in monsoon deficient areas? CPI is still high and currently hovers close to 8% levels," said a treasury head at a foreign bank.
"The RBI needs to get comfortable on the inflation front, until then it will be too early to expect a rate cut," said Parthasarathi Mukherjee, president at Axis Bank.
For now, it appears that inflation is still adamant and food production may be in the normal to below normal range. In 2011-12, foodgrain production was 259.29 million tonne and fell to 255.36 mt in the subsequent year 2012-13 and a bumper production of 264.77 mt in 2013-14.