By Ratnajyoti Dutta

NEW DELHI (Reuters) - August rains hold the key to India's major summer crops such as rice, soybean, cane and cotton, after a wet end to July failed to make up fully for a dry start to the four-month monsoon season.

The first month of the June-September season was the driest in five years, raising fears of the first drought since 2009, when the monsoon was the weakest in nearly four decades.

India's farming sector accounts for around 14 percent of the economy, but two thirds of the nation's 1.2 billion people depend on farming for a livelihood and more than half of its arable land needs the summer rains.

In 2009, the weakest monsoon since 1972 cut sugar cane output in India, the world's second-biggest sugar producer after Brazil, and pushed New York sugar price to 30-year highs.

By the end of that year, India's food inflation had reached double digits, with summer harvests including rice also falling.

After one of the slowest starts in a century, this year's monsoon had a poor run until mid-July, leading farmers to plant less than half of the normal area of most summer crops.

A late revival shrank the shortfall in rain to around 10 percent below average in July, the India Meteorological Department's update showed on Thursday, a sharp improvement from the 43 percent deficit in the first month of the season.

"Rainfall in August is crucial as plantings for most of the summer crops have already been delayed due to the poor start of the rain season," said J.S. Sandhu, India's farm commissioner.

Rains were 22 percent below average during the first half of the monsoon season until July 31.

"August holds the key as a quarter below average rains would make drought a reality," said a farm official who did not wish to be identified.

Officials forecast rains would improve in the cane areas of north India and rice areas of the eastern region in the next week. A likely slowdown in rains over central region would help finish planting of soybean, the main summer oilseed crop of India, the world's leading importer of vegetable oils.

A late arrival of the monsoon on the southern Kerala coast and subsequent slow progress towards the grain bowl northwest region made the first month of the rain season the driest in five years.

"The second half of monsoon is expected to be better than the first half," said D.S. Pai, lead forecaster of the state-run weather department.

India is a major global producer and consumer of commodities such as rice, corn, sugar, soybean, cooking oils and cotton. The summer crops are planted during the monsoon season.

STATE SCENE

Farm commissioner Sandhu said a healthy rain spell over rice areas of eastern and north India would improve the planting prospects for rice, the main summer season food crop.

"Sowing activities in seven districts have been badly hit by poor rains while early sown rice varieties have been destroyed," said Bhartuhari Mahtab, a member of parliament from Odisha, a major rice province of the world's second-biggest producer of the grain.

The poor monsoon has given Thailand scope to reclaim the position as the world's leading rice exporter from India after a gap of two years.

Mahtab said there had been no reports of a drinking water crisis from the eastern state's thirty districts.

Three states - Kerala, Bihar and Punjab - have requested the federal government to lower prices of diesel for irrigation use.

These states have also sought improvements in the supply of seeds for short-duration crops and alternative varieties to help cope with the shortage of water.

(Editing by Mark Potter)