Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Politics / Policy/  Five reasons why the monsoon forecast is important
BackBack

Five reasons why the monsoon forecast is important

IMD will release its second monsoon forecast for the year later on Thursday

A good monsoon is expected to reduce crop failure, revive farm income and boost rural spending. Photo: AFP Premium
A good monsoon is expected to reduce crop failure, revive farm income and boost rural spending. Photo: AFP

New Delhi: The India Meteorological Department (IMD) will release its second monsoon forecast for the year later on Thursday. In April, IMD projected above-normal rains during the critical south-west monsoon as El Nino, the giant weather phenomenon that drove global temperatures to new highs, waned. Here are five reasons why you need to watch out for a good monsoon.

1. Impact on agriculture

Two years of deficit monsoon of 12% in 2014 and 14% in 2015 has led to a protracted period of drought and rural distress and rise in farmer suicides. A good monsoon is expected to reduce crop failure, revive farm income and boost rural spending.

The water storage available in 91 major reservoirs of the country for the week ending 26 May was just 17% of the total storage capacity of these reservoirs. A good monsoon will help the storage situation in major reservoirs, easing supply of water.

The drought has led to an agrarian crisis with 3,228 farmers committing suicide in Maharashtra in 2015, the highest in 15 years. The Central government claimed 1,841 of these suicides can be directly linked to farm distress. Maharashtra recorded the highest number of suicides, followed by Punjab, Telangana, Karnataka and Andhra Pradesh. Better rainfall, hopefully, will mean less of such unfortunate acts.

2. Impact on inflation

Though retail inflation remained under check last year despite deficit rainfall, it has started inching up again. Consumer price index-based retail inflation quickened in April to 5.39% and food prices rose by 6.23%, mainly on account of a sharp increase in the prices of pulses, sugar, meat and fish. A good monsoon will ensure bumper crop production, keeping downward pressure on the overall inflation level in the economy.

3. Impact on interest rates

The Reserve Bank of India (RBI) has set the retail inflation target at 5% for March 2017. If price rises remain within the comfort level of the central bank, it is expected to cut interest rates further, helping revive demand in the economy. RBI is scheduled to review its monetary policy on 7 June and is widely expected to hold on to the current level of policy rates.

4. Impact on rural demand

Two successive droughts have also meant rural demand has waned significantly, leaving urban demand and public investment to drive the economy in the absence of pick-up in private investment. A good monsoon will ensure better farm output and more cash in the hands of the farmers, helping revive demand for consumer durables in rural India. However, bumper crop production could also put downward pressure on prices, meaning less gain for farmers. For any gain, farmers also have to wait at least till end-October when the rain-fed Kharif crops are harvested.

5. Impact on economy

Due to back-to-back droughts, the farm sector growth contracted by 0.2% in 2014-15 and is estimated to grow at a poor 1.2% in 2015-16. Normal monsoon will mean better support to the economy from the farm sector. In fact, economists believe a good monsoon will be the swing factor this year, giving a one-time boost to the GDP (gross domestic product) number which is expected to be close to 8% in 2016-17 against 7.6% in the previous year.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Politics News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 02 Jun 2016, 02:13 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App