India Ratings & Research (Ind-Ra) believes that the recently-concluded normal monsoon season will provide a much-needed cushion to both Indian agriculture and inflation in 2021-22.

The arrival of the new kharif output in the market, along with a cut in the import duties for edible oils, will help in keeping food inflation benign but the agency expects the retail prices of edible oils to stay elevated as nearly 56% of the domestic demand is met by imports. Thus, Ind-Ra expects the average retail inflation for 2021-22 to remain under 6%.


The country witnessed 99% of its long period average (LPA) rainfall in the monsoon season of June-September, although there were significant variations across months and different regions. The rainfall for the country as a whole was 110% of LPA in June; 93% in July; 76% in August and 135% in September. While East and Northeast India (88%) and Northwest India (96%) received lower rainfall, Central India (104%) and South Peninsula India (111%) received higher than the normal rainfall during the monsoon period. 

 Figure 1


According to data by the Indian Meteorological Department (IMD), 27 out of the 37 subdivisions reported normal-to-excess rainfall (deviation from the LPA greater than -19%) while the other 10 saw deficient rainfall (less than -20% deviation from the LPA) this season. The 10 deficient-rainfall subdivisions are Arunachal Pradesh, Assam, Chandigarh, Jammu & Kashmir, Ladakh, Lakshadweep, Manipur, Meghalaya, Mizoram, Nagaland. However, the agency draws comfort from the fact that none of the major agriculture producing states belong to this category.

Figure 2


The water reservoir capacity, on 30 September 2021, stood at 80% of the full reservoir level at an all-India level- lower than the corresponding period of 2020 and 2019. A similar trend was observed broadly at all regions except the southern region, which had better live-capacity in 2021 than in 2019 and 2020. The water levels in the northern and eastern regions, which comprises Himachal Pradesh, Punjab, Rajasthan, Odisha, West Bengal, Jharkhand, Nagaland and Tripura are at a multi-year low, implying a downside risk to the sowing of the rabi crops, particularly pulses and oilseeds, in these areas.

Figure 3


The acreage data, on 1 October 2021, points towards a record kharif sowing- reaching 112.2 million hectares. Among the major kharif crops, the acreage of rice and pulses was higher yoy while the sown area for oilseeds and coarse cereals was lower by 1.5% and 2.7% respectively. Overall, the sowing in the current kharif season has been satisfactory, despite spatial and temporal fluctuations in the rains in the country. As a result, the first advance estimates for kharif food grains production in 2021-22 are projected to reach to 150.5 million tonne.

Figure 4


Based on the spatial and temporal distribution of 2021 monsoon rainfall, Ind-Ra expects agricultural gross value added (GVA) growth in FY22 to be in the range of 3% - 3.5%.

Although agriculture’s share in the Indian economy has reduced over the years (FY21: 16.4%; FY00: 27.1%), its relevance stays intact as far as retail inflation is concerned mainly due to the high (39.1%) share of food items in the retail inflation index. Resultantly, the monsoon is always a keenly-watched phenomena for the stakeholders and policy makers.

 Figure 5


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Analyst Names

  • Paras Jasrai

    Analyst
    India Ratings and Research Pvt Ltd DLF Epitome, Level 16, Building No. 5, Tower B DLF Cyber City, Gurugram Haryana - 122002

    Dr. Sunil Kumar Sinha

    Principal Economist and Director Public Finance
    +91 124 6687255

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