Monsoon cheers farms; more rice exports seen.

MONSOON DELIVERED normal rainfall in the past week, boosting prospects of higher farm output and lower inflation, and encouraging India to further relax curbs on rice exports.

Rainfall in the seven days to June 9 recovered to normal after an initial hiccup when cyclone Phet hindered the advance of the monsoon, which irrigates 60% of farms in the world's leading consumer and producer of edible oils, sugar, wheat, rice and cotton, the weather office said.

Rainfall since June 1, the start of the four-month season, was 6% below normal because of the cyclone in the first few days of the month, but theweather office was upbeat.

"We are happy with the monsoon progress. A decline in seasonal rainfall at this stage does not mean anything," India Meteorological Department spokesman BP Yadav said.

Farm scientists said the timely onset of the monsoon on May 31 and normal rainfall in the past week augured well for farm output that dipped in 2009 as rains were the weakest since 1972.

"Production prospect for summer crops has brightened with the monsoon advance," HS Gupta, director of the Indian Agricultural Research Institute, told Reuters.

To boost summer-sown planting, the government on Thursday raised the price at which official agencies buy rice from farmers.

"It's a good incentive for farmers to grow more rice this summer," Gupta said.

FAVOURABLE CONDITIONS

Monsoon rains, expected to be boosted by the favourable La Nina weather phenomenon, are likely to advance further into Maharashtra, where cane and cotton are grown, and corn-growing Karnataka in the next two days, theweather office said.

"Conditions are favourable for further advance of southwest monsoon," the weather office said in its latest forecast.

Encouraged by the favourable outlook for the monsoon and crops, the government is likely to allow export of some rice to Maldives, exempting the shipment from the ban on export on non-basmati grades, sources said.

India has allowed limited exports of wheat and rice to South Asian countries in recent months to create space for the new crop, but free exports are still banned as the country's food prices have risen sharply since last year's drought.

India's food price inflation quickened at the end of May to 16.7%, putting upside pressure on the wholesale price index that could prompt monetary tightening by the central bank.

The progress of monsoon rains would be a key influence in further relaxation of curbs on grain trade.

The government is counting heavily on normal monsoon rains that would help calm the widely watched wholesale inflation rate, that has been close to 10% in recent months, provoking protests in the country.

Soaring inflation is also a key concern of an official panel that has been empowered to take a decision easing state controls on fuel prices.

The panel led by Finance Minister Pranab Mukherjee put off a decision at its meeting on Monday, while the cabinet did not discuss the issue at its meeting on Thursday.

Source :- moneycontrol.com/news