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Rains bring some relief to India; reservoir gap up

Last Updated: Thursday, August 20, 2009 - 21:11

New Delhi: Monsoon rain in the past week increased to the highest in a month but the main soybean area saw weak rainfall and reservoirs fill up at a much slower rate than normal, putting at risk power supply and winter irrigation.

In its latest moves to mitigate the impact of a drought, the government raised purchase prices of rice and lentils to boost supplies and increased states` borrowing limits by USD 4.3 billion to help meet additional expenditures and stimulate demand.
Rainfall in the week to Aug. 19 was only 2 percent below normal, improving after deep deficits in the past three weeks, but key crops remained endangered and the shortfall in rains since the start of June was 26 percent.

The June-September monsoon is crucial to the health of Asia`s third-largest economy, and this year`s poor rains have pushed up food prices and could severely hit rural incomes and spending.

A sugar trade body said millers have contracted 4 million tonnes of raw sugar imports to meet demand, particularly in the festival season starting next month. High prices and fears of scarcity have led to hoarding in the world`s largest consumer of sugar.

"Higher prices are not dampening demand. Media reports have created panic among consumers. People who buy five kilos of sugar every month, they are buying 10 kg," said Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association.
India`s wholesale price index fell in the year to Aug. 8 for the 10th week in a row, but the food article index rose an annual 10.5 percent.

Economists expect broader inflation to rise sharply in coming months as the high base of comparison from last year`s record oil prices lapses.

However, with a drought hitting the economy and higher food prices hurting consumers, analysts said the Reserve Bank of India could maintain an easy policy stance for longer than earlier thought and not raise interest rates in the fiscal year to March 2010.

Government data showed water levels in main reservoirs at 39 percent of total capacity, crawling up 1 percentage point in a week, much slower than the rise last year when water levels rose 14 percentage points to 58 percent of capacity.

Rain deficit

Prime Minister Manmohan Singh said this week that India was facing the prospect of a drought, and the government is planning a crackdown on hoarding of farm commodities and imposing limits of stock traders can keep.

The weak monsoon has disrupted planting of several crops such as rice, sugarcane and oilseeds and raised food prices, despite the improvement in mid-August.

Rainfall in cane-growing Uttar Pradesh state was 58-89 percent higher than normal in the week to Aug. 19, while the soybean-growing Madhya Pradesh state saw a deficit of 24-31 percent, the weather office said.

The government hopes to step up crop planting in the winter season to offset the expected loss in the summer-sown crop.

It is also aiming to increase purchases of grain from farmers to ensure adequate stocks with government agencies.

Home Minister Palaniappan Chidambaram said the cabinet had approved a higher price for rice purchased by government agencies.

Bureau Report

First Published: Thursday, August 20, 2009 - 21:11
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