>MONSOON UPDATE SEPTEMBER 04, 2009 (MORGAN STANLEY)

ANOTHER GOOD WEEK OF RAIN

•Weekly rainfall was 8% above normalfor the week ended September 2:On an unweighted basis, aggregate country-wide rainfall was 8% above normal for the week ended September 2, compared to 5% above normal in the previous week. Total country-wide rainfall weighted by cropped area was 4% above normal for the week ended September 2 compared to 5% below normal for the week ended August 26. According to IMD, on an all India area weightedbasis, cumulative rainfall was 23% below normal up to September2, compared to 25% below normal during the previous week.

•Southern and western region received more rains this week:On an unweighted basis, rainfall for the week ended September 2 was above normal in the southern (51%) and western (34%) regions, but below normal in the eastern (-29%) and northern (-24%) regions. On a cumulative basis, the rain-fed states of Andhra Pradesh, Madhya Pradesh, and Bihar remain affected by below-normal rainfall. The northern states of Uttar Pradesh, Haryana, and Punjab have also witnessed a large shortfall in rain; however we believe the well-developed irrigation facilities in these states could provide some buffer. So far, 278 districts have been declared drought prone (out of a total of 626 districts in the country).

•Cropped area affected by below-normal rainfall was largely steady:Based on cumulative rainfall up to September 2, the cropped area affected by below-normal rainfall (most important measure for assessing risk to crops) was largely stable at 72.9% compared to the previous week.

•Water reservoir level in dams less than last year: According to Central Water Commission data, the water storage at81 key reservoirs across the country was 68.8 billion cubic metresfor the week ended September 3, which is 45% of the live capacity at full reservoir level. This is lower than the storage level of 64% during the same period last year and 60% average for the last 10 years.

•Crop area under cultivation for kharif crops stabilized comparedto previous week: As of August 28, crop area under cultivation for summer (kharif) crop (accounting for about52% of total crop output) declined 8.2% YoY. This compares with declines of 8.1% and 6.4% registered during the weeks ending August 20 and August 12, respectively.

To see full report: MONSOON UPDATE