India's soy crop in peril on feared drought, slower economy

The government of India on Tuesday (August 11) sees slower economic growth and lower yields of key crops as the weather office cuts its monsoon forecast with more than a quarter of districts are seen to be affected by drought.

 

While many of these districts are not major crop producers, most soy areas remain parched and total rainfall since June 1, the start of the four-month monsoon season, has been 28 percent short of normal.

 

The weather office, which initially projected normal monsoon rains, has forecast widespread rains in central India, the main soy-producing region that has seen virtually no rain in the past three weeks.

 

The forecast will ease concerns of soy producers and traders, who fear that crop yield may drop up to 7 percent if rains are delayed further.

 

Finance Minister Pranab Mukherjee said 161 districts were prone to drought and sowing of crops was down 20 percent from last year.

 

The minister's statement underscored growing government concern that a weak monsoon could reduce crop output and dampen economic growth already hit by a global downturn.

 

The rain deficit since June 1 worsened to 28 percent at the weekend, raising fears that the season may turn out to be as bad as 2004, when summer crop output fell 12 percent after a drought. GDP fell to 7.5 percent that fiscal year from 8.5 percent in the previous year.

 

 

Mukherjee said the government was ready to manage a drought and a contingency plan was also in place.

 

Weak monsoon rains have also dented Indian shares, which fell 5.6 percent over three days before recovering 0.4 percent on Tuesday.