By : Dheeraj Upadhyay
Monsoon rains are important for agriculture and the Indian economy. The Indian Meteorological Department (IMD) has forecast of 3rd consecutive normal monsoon season with 98% rainfall activity for the long period average (LPA) while the country’s private forecaster Skymet has predicted normal rainfall at 103% of LPA.
The southwest monsoon (June-Sep) season starts with rains on the Kerala coast around June 1 and generally covers the country by July. The normal, or average, monsoon means rainfall between 96% and 104% of a 50-year average of 89 cm (35 inches) as per the IMD’s classification.
Monsoon to boost demand and growth
Monsoon rains are important for the economy as it brings about 70% of India’s annual rainfall and set the tone for better yield of rice, wheat, sugarcane & oilseeds. Agriculture contributes to around 17% of India’s $2.8 trillion economy but employs more than 60% of its population.
Decent monsoon result in higher crop output, boost consumer goods and rural income and also helps rein in inflation. Monsoon rains replenish reservoirs and recharge groundwater, allowing better irrigation and more hydropower output. Though India is self-sufficient in rice and wheat, but a drought-like situation would increase imports of oilseeds and pulses leading to a hike in inflation.
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Normal monsoon brings cheer to Indian farmers as well as to the policymakers; since a good harvest increases rural incomes, lowers inflation, and boosts consumption. India Inc has set high hopes on rural demand since rural income after a good harvest will certainly boost demand for consumer goods, and automobiles like two-wheelers and tractors along with other discretionary consumption around Diwali festivals.
To revive the sagging sale in the automobile sector rural demand is a must. According to the Federation of Automobile Dealers Association (FADA), automobile retail sales have crashed by 55% in May now their hopes are set on good rains.
However, tractor volumes were above estimates in May, and a better harvest will only support the said demand stated the India Rating report.
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As per Met Dept predictions if the rains remain normal and evenly spread it may bring an early respite for the rural economy thus pushing demand for vehicles faster than expected,” said FADA in a statement.
Though the second wave has minimal impact on the rural distribution channel rural demand is a must for small ticket items solely produced for the rural markets, said ITC spokesperson. “We are hoping that a good harvest season will bring more disposable income into the hands of the rural population. The good monsoon season would certainly bring in the much-needed respite to lift consumer spending and offset covid induced losses” said Category Head of an FMCG company. Normal monsoon augurs well for Covid battered Indian economy it will provide the much-needed impetus to the overall economic cycle by boosting rural income and consumer demand along with cooling commodity prices. According to a report from Kotak Institutional Equities, a bumper Rabi harvest, and record procurement from govt along with free ration till Diwali will provide enough money into the hands of rural consumers as the rural economy accounts for about 45% of India’s GDP