Good monsoon to spur growth in Indian economy.

The concerns over the farm and economic growth are waning amid hopes of generous rainfall this year, which may significantly boost farm incomes, rural demand and the overall growth momentum in Asia’s third biggest economy.

In its initial projection, the India Meteorological Department (IMD) expects monsoon to be 106 per cent of the long period average (LPA) in 2016.

If the Met Department’s prediction of a good monsoon turns out to be right, India's economy could grow at 8-8.5 per cent in 2016-2017 from the projected 7-7.5 per cent.

Agriculture is one of the major sectors of the Indian economy and contributes about 17 per cent to the country’s GDP. Thus, a normal monsoon would be an encouraging supply shock, strengthening the rural demand by augmenting the supply of farm products, thereby significantly contributing to the India’s economic growth.

According to the SBI research report, agricultural GDP is most likely to see a robust performance in FY17 and may even touch 7-8 per cent mark if IMD’s prediction of a good monsoon comes true.

For the Modi government, which has bet big on rural India as the key economic growth driver and dreams of doubling the farm income by 2022, a good monsoon would bring a lot of respite. At the same time, it would augur well for Raghuram Rajan, who is tasked with keeping retail inflation within the 5 per cent, giving an adequate room to the Reserve Bank of India (RBI) to bolster monetary easing.

Going ahead, the stable microeconomic environment, forecast of an above-average monsoon, falling interest rates and higher public investments would boost the economy, despite a contraction in exports amid global slowdown.

Latin Manharlal Group.