Normal Rains Expected to Revive Indian Economy

India is likely to be lucky for second year in a row as the normal monsoon forecast of the India Meteorological Department brings the promise of a year of growth and good health for India’s economy and ecology.

In the first prediction for this monsoon season, the rainfall during June to September, is likely to be normal between 96-104 per cent of the 50-year average rainfall of 89 cms, the Indian Meteorological Department said.

If the forecast holds, it will revive rural demand, give a much-needed boost to the agricultural produce and help in taming inflation pressures. This could lead to the lowering of the food prices, strengthening of the agricultural incomes and eventually putting more purchasing power in the hands of the rural population. The forecast is also critical to the government’s hopes of achieving an expected growth rate of more than 7.5 per cent.

Two-thirds of India’s population depends on farm income and nearly 60 per cent of summer sown areas do not have assured irrigation facilities. Summer crops account for nearly half of India’s food output, including rice, lentils, sugar, spices, mangoes and oilseeds.

Moreover, IMD’s projection of 38 per cent rainfall, which is considered normal, would largely benefit water reservoirs, hydro-power projects and irrigation facilities for good harvesting. Industries such as FMCG, tractor and auto sector are also expectedto witness improved sales.

Further, IMD also flags the risk of El Nino in the latter part of the season. This does not necessarily mean a monsoon failure, as only a third of El Nino years are drought years.El Nino is a climatic phenomenon which is the warm phase of the cycle of warm and cold temperatures in the Pacific Ocean that also impacts the monsoon.

IMD, however, said weak El Nino and positive Indian Ocean Dipole (IOD) are presently combining to give a positive monsoon scenario for India in 2017.

Going forward, the growth in Asia’s third biggest economy would depend on the spread and the extent of the monsoon rains in the months ahead and impact of the Goods and Services Tax (GST) once it is rolled out.