Document summary
India’s Met Office has forecast a normal June-September south-west monsoon at 98% of long-period average and will provide a rain forecast for the sowing months of July-August in June. These rains hold the key to the autumn harvest, accounting for 7% of GDP. A normal monsoon is critical in preventing India’s inflation getting out of hand in FY12. A 5% increase in agro prices impacts inflation by 170bp. If the rains are normal, agflation, currently 10.7%, should decline in 2H11, enabling inflation to peak as well, in turn allowing the RBI to pause after 100bp of rate hikes until October.