Deficient rain: RBI to act

Poor monsoon is a matter of concern and could affect food prices, but the time is not ripe for the Reserve Bank to act, its Governor D Subbarao said on Friday.

"Yes, the agricultural situation is disturbing and there will be pressure on food prices. We are sensitive and mindful of the drought's impact on inflation and will take appropriate steps," he told reporters on the sidelines of a RBI function in Hyderabad on Friday.

Subbarao, however, refused to discuss in public any mid-course policy correction that the central bank may consider.

Monsoon is this year expected to bring 19 per cent less rainfall than usual, resulting in an equivalent decline in sowing activities.

The Centre has already asked states to act against hoarders to check rising prices.

Meanwhile, Prime Minister's Economic Advisory Council chairman C Rangarajan pointed out that price rise might not be a problem at the moment, but he foresaw an escalation in prices towards the end of this year.

As per the wholesale price index the price rise was currently negative, but the RBI should think in terms of taking appropriate measures when prices rise, he added.

He said there would certainly be an impact on economic growth because of the prevailing drought. But Subbarao said the economic growth projection of 6.5 per cent stands good even now.

No hope of rains making up for deficiency: According to another report from New Delhi, though parts of northern and eastern India received rainfall this past week but weather scientists have given up hope that improvement in monsoon activity could wipe out deficit for this season.

"The rainfall activity slightly increased with scattered to fairly widespread rainfall over east India during second half and over central India and adjoining northern plains towards end of the week," an IMD official said.

At 27.4 mm, the country received 56 per cent less rain between August six and 12 than normal with peninsular India getting 68 per cent deficient rainfall. Rains played truant in central and northwest India where deficiency was 65 per cent.

The cumulative seasonal rainfall for the country as a whole this season has been 29 per cent below the long period average. The LPA, at 89 cm, is the average rainfall the country received over a 50 year period beginning 1940.

The India Meteorological Department had downgraded its monsoon prediction to 87 per cent of LPA last week from 93 per cent it had forecast in mid-June. In April, IMD had said that the country would receive 96 per cent of LPA this season.

Last week's exercise was a the second downward revision by the IMD with a model error of four per cent.

"It is unlikely to bridge the entire gap in deficiency this season," IMD director general Ajit Tyagi said.