News: Monsoon rains lash Kerala coast ahead of schedule

(RTR 26/05/2006) New Delhi - The annual monsoon rains hit the southern Kerala coast six days ahead of schedule on Friday, raising prospects of another year of robust growth for a country where most of the population relies on agriculture.

Asia's third-largest economy has expanded at an average 8 percent in the past three years after normal rains, and the central bank expects growth of 7.5-8.0 percent in the fiscal year ending March 2007.

Analysts and traders said the onset of the monsoon would have a positive effect, but its progress and spread over the four-month season would be the barometer to assess its impact on prices and the overall economy.

"The monsoon has hit Kerala on Friday," a weather department official told Reuters, saying conditions had set in over the last two or three days.

The Meteorological Department confirmed the onset of monsoon over the southern state and prospects of its rapid progress toward neighbouring Karnataka and the northeast regions.

The June-September southwest monsoon is the main source of water for farming, which generates about a fifth of gross domestic product.

With nearly two-thirds of India's billion-plus population dependent on farm-related income, the arrival and distribution of the rains play a major role in determining eventual demand in India's $700-billion economy.

"It is positive news," said Indranil Pan, chief economist with Kotak Mahindra Bank. "But we have to look at the performance of monsoon during the season to know its impact on the prices and the economy."

In April, weather officials forecast this year's rains at 93 percent of the long-term average, with a 22 percent probability of being well below average.

COMMODITY PRICES

Traders said the rains would halt a bull run in the prices of commodities and improve yields of oilseeds, rice, cotton and sugarcane crops that are highly rain-dependent.

The federal government, concerned by the sharp spurt in the prices of sugar and pulses, has already resorted to huge wheat imports to bridge a supply shortfall.

"It will have a salutary effect on the runaway commodity prices in India," said Atul Chaturvedi, president of Adani Exports, a top grains trading firm. "The market has already come down."

Traders said good rains would benefit farmers by allowing crops to be planted and harvested at the right time.

"If the monsoon now advances without any delay it will benefit the farmers and sowing of soybean and groundnut will be over by mid-June," Chaturvedi said. "But we will have to see the spread of the rains during the entire season."

Govindhbahi Patel, a leading oilseeds trader at Rajkot in the groundnut-growing state of Gujarat, said a normal advance of the monsoon would help oilseed sowing and the crop.

Earlier this month, the Meteorological Department had forecast the monsoon would hit the Kerala coast two days ahead of its normal onset date of June 1.

The monsoon usually arrives over the commercial capital of Mumbai by June 10, and brings respite from the summer heat in the capital New Delhi by June 29. Most years it covers the entire country by July 15.