The country is likely to get its third successive normal monsoon. This will help buoy rural demand for a host of items such as cement, steel, two-wheelers, fertilisers and education, among others, help temper the impact of the pandemic and help the economy get back on its feet.
The Indian Meteorological Department (IMD), India’s official weather forecaster, had some good news for the Indian economy this week. The Southwest Monsoon, which mainly provides water for India’s farms, arrived on the Kerala coast on June 3, two days behind schedule.
PTI quoted the IMD to say the southwest monsoon has advanced into parts of the central Arabian Sea, entire coastal Karnataka, Goa, some parts of Maharashtra, most parts north interior Karnataka, some parts of Telangana and Andhra Pradesh, more parts of Tamil Nadu and the central Bay of Bengal, and some parts of northeast Bay of Bengal.
It is expected to advance through the Deccan peninsula into the eastern coastal state of Odisha and then into the eastern states of West Bengal, Bihar and Jharkhand by the middle of this month.
The monsoon, which extends for four months from June to September, provides large areas of western and central India with more than 90 per cent of their annual precipitation and southern and north-western India with 50 per cent to 75 per cent of their total annual rainfall.
Monsoon rains are important for the Indian economy as they sustain about 50 per cent of India’s farms, for which it is the only source of water. The kharif crop, as the summer harvest is called in India, is critically dependent on monsoon rains.
A good monsoon is critical for the well being of the Indian economy as rural India, which is primarily dependent on agriculture accounts for about 46 per cent of the country’s economy.
This was acknowledged by the Reserve Bank of India (RBI) in a recent press release following its June 4 monetary policy. “Notwithstanding the sequential decline of the indicators of rural demand in April, rural demand is expected to remain strong as forecast of a normal monsoon bodes well for sustaining its buoyancy going forward. The increased spread of Covid -19 infections in rural areas, however, poses downside risks. Taking all these factors into consideration, real GDP growth is now projected at 9.5 per cent in 2021-22 consisting of 18.5 per cent in Q1; 7.9 per cent in Q2; 7.2 per cent in Q3; and 6.6 per cent in Q4 of 2021-22. Says the RBI press release issued on June 4 after the MPC meeting that maintained a status quo on rates,” the release quoted RBI Governor Shaktikanta Das as saying.
A good monsoon is likely to augur well for rural prosperity, which supports demand for a variety of goods and services. Contrary to popular perception, even items like cement, steel, electrical goods and automobiles (mainly two-wheelers and tractors). Then, apparel and footwear, education services, logistics and transport, commercial vehicles, fertilisers and farm equipment, among a host of other items, also depend for their success on rural demand.
Despite accounting for only about 16 per cent of India’s GDP, rural India provides employment to 58 per cent of the country’s population. A prosperous rural India, thus, provides ballast to the rest of the economy.
This, in turn, creates demand for sectors more traditionally identified with urban India, such as passenger cars, white goods, software, etc. Thus, rural India plays a critical, if somewhat under-recognised, role in keeping India’s much vaunted growth engine purring.
If, as forecast, the monsoon is normal this year, it will mark the third successive year of normal rains. This will help temper the effect of the Covid-19 pandemic and help India get back on the growth trajectory much faster.
IMD Director General Mrutunjay Mohapatra told the media that that the monsoon is likely to be normal in the country as a whole, though the eastern and the north-eastern parts of India are likely to experience some deficiency.
"Southwest Monsoon seasonal rainfall over the country as a whole is most likely to be normal (96 to 104 per cent of Long Period Average or LPA)… Quantitatively, the monsoon seasonal rainfall over the country as a whole is likely to be 101 per cent of the Long Period Average (LPA) with a model error of plus or minus 4 per cent," he said.
The LPA of the season rainfall over the country as a whole for the period 1961-2010 is 88 cm.
The onset of the monsoon could, thus, herald the much-awaited turnaround for the Indian economy.