SBI’s monsoon impact index indicates better monsoon prospects

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State Bank of India The current Monsoon Impact Index (MI), with a current value of 64.0 is better than the 2022 full season MI of 60.2, indicating better prospects for the monsoon from this point on.

This observation comes in light of the uncertainty related to the monsoons due to the appearance of El Nino phenomenon Even with the Indian Meteorological Department (IMD) forecasting a normal monsoon.

The “SBI/MI Monsoon Impact Index” includes four parameters from 15 major food grain-producing countries—their share in total food grain production, precipitation deviation from normal, irrigation status, and total precipitation deviation between states.

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On a scale of 0–100, values ​​of MI closer to 100 indicate a lesser effect while values ​​with increasing distance from 100 indicate an increasing effect of the spatial distribution of precipitation on the economy.

The Economic Research Division of the SBI (ERD) expects that if the MI moves towards 90, the negative impact on the economy will be almost non-existent.

Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, noted that in the agriculture sector, food grain production is highly dependent on monsoon performance and therefore it is more appropriate to estimate monsoon performance with Consumer Price Index (CPI) for grain and produce inflation.

“While the association of CPI grain inflation with IMD monsoon LPA (long-period average) is low and positive (which is clearly incorrect), the association with our monsoon impact index is high and negative.

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“Interestingly, despite the lack of rainfall on an aggregate basis, the grain-producing states received significant amounts of precipitation in FY23 as opposed to FY22 when they were deficient,” Ghosh said.

Ecowrap report

The ERD, in its report “Ecowrap”, estimated that in the case of prevailing El Niño conditions but supportive conditions in the Indian Ocean (Indian Ocean Dipole/IOD greater than 0), there is no impact on real agriculture GVA (gross value added), except for a worst-case scenario. A condition that is not likely to be severe El Nino It could lead to higher food prices.

The report cited predictions of a more or less normalized monsoon by the IMD in the Indian Ocean Dipole Index (IOD), an interaction between warm and cold waters in distinct parts of the Indian Ocean, despite the strong possibility of El Nino developing in the Pacific.

“India has received lower average precipitation than for a long time during times when El Nino was accompanied by a neutral or negative IOD.

“The IOD is currently neutral (>0.4 positive, <-0.4 negative, and values ​​in between read neutral), although a positive IOD is likely to develop in the coming months, thus ruling out any negative impact on the monsoon in India due to El Niño.”