By Elton Gomes
In its first monsoon forecast for 2018, private weather forecasting agency Skymet has stated that India is expected to receive a normal monsoon. Skymet claimed that between June to September, India will witness a normal monsoon season at 100% of the long-period average (LPA) of 887 millimetres.
With an error margin of plus or minus 5%, the forecasting agency also claimed zero possibility of a nationwide drought or less rainfall, when the cumulative rainfall falls below 90 percent of the LPA.
Average or normal rainfall in India amounts to between 96% and 104% of a 50-year average of 89 cm, with the monsoon starting in June. Drought conditions exist when rainfall dips below 90% of the average.
Monsoon directly affects the agricultural sector
As the agricultural sector contributes roughly 18% to the GDP, India continues to be dependent on agriculture. The livelihood of Indian farmers takes precedence, as they depend on the unpredictable monsoons. With India acquiring nearly 53% of its agricultural produce during the kharif season, which extends from June to September, an irregular monsoon is capable of disrupting agricultural output.
A favourable monsoon yields sufficient agricultural output, which in turn can help farmers by increasing their revenue. What is more, an increase in farmers revenue will increase consumption in the rural areas, benefitting the GDP and the economy.
A normal monsoon helps control food inflation, made possible by the adequate availability of produce. When drought conditions exist, prices tend to soar. Besides escalating prices, a poor monsoon leads to insufficient produce, and this translates to the nation having to import agricultural output.
A favourable amount of rainfall facilitates irrigation in farms. Farmers are therefore less dependent on motors run by diesel and other fuels for irrigation. In other words, good rainfall can keep a check on the demand for subsidised diesel utilised for irrigation.
India continues to be a rain-backed economy
A dismal agricultural output stifles the government in terms of farms subsidies. The government also finds it difficult to reduce fiscal deficit when agricultural production is low. India tends to remain self-sufficient concerning major food grains such as rice and wheat. However, a drought in 2009 compelled the nation to import sugar, which led to record price rise and soaring inflation.
On the other hand, poor rainfall can directly impact the countrys GDP, ranging from 2% to 5%. This is mainly because agriculture significantly impacts purchasing power of a large section of the population.
V.K. Vijayakumar, chief investment strategist at Geojit BNP Paribas, told: AThe National good monsoon means higher purchasing power. A good monsoon will increase farm output and incomes, thereby stimulating rural demand. Sectors such as autos and fast-moving consumer goods, which have significant rural demand, will benefit from rising rural incomes.
A normal monsoon, therefore, is absolutely necessary to prevent the economy from experiencing any hiccups. The interrelation between the monsoon, the economy, and the agriculture sector is paramount to India. However, the agricultural sector’s dependence on the monsoon makes it an unpredictable and fluctuating contributor to the GDP. It remains to be seen how long the agricultural sector will continue to be considered a significant contributor to India’s economy.