Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research, on Monsoon outlook

"Both IMD and Skymet predicting a normal southwest monsoon in 2021 augur well for the Indian economy which continues to be impacted by the Covid pandemic and increased inflationary pressures. The CPI as well as the WPI inflation print have risen significantly over the last 3 months, reaching 5.52% and 7.39% in March 2021 respectively. While food inflation has moderated on a sequential basis, it still recorded 5.24% in March 2021 which reflects the sticky inflation in certain food categories namely edible oil, fruits, pulses, meat and fish. Clearly, food inflation plays a critical role in anchoring the overall inflation levels and that is where lies the importance of monsoon. Needless to say, a favourable monsoon will lead to a healthy crop output and cool down food inflation. Our base scenario of 11.0% GDP growth and 5.0% average CPI inflation in FY22 also takes into account a conducive monsoon season with a balanced geographical and temporal distribution. With the expected absence of both El Nino and La Nina weather patterns, IMD and Skymet have forecast the monsoon rainfall to be 98% and 103% of the long period average (LPA). Skymet in particular has predicted that there is a 85% probability of normal or above normal precipitation in 2021. Although the agencies have forecasted 'below normal' rainfall in eastern and north eastern India, it is unlikely to impact crop output in a major way, given the high LPA precipitation levels and ground water availability in those regions."

Source : Equity Bulls

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