Economy
Mint Primer | A good monsoon will be great for India. Here’s why
Summary
IMD forecasts an above-normal monsoon, which is vital for India’s agriculture and economy. Increased rainfall will potentially lower food inflation, allowing the Reserve Bank of India to reduce interest rates and stimulate consumption.The India Meteorological Department (IMD) has forecast an above-normal monsoon this year. That should be music to the ears of the policy makers. Mint looks at the importance of a good monsoon and how it will solve some challenges the Indian economy is facing now.
Are we in for another year of good rain?
It appears so. Earlier this week, IMD, India’s national meteorological service provider, has forecasted that the Southwest monsoon this year would be above normal. The rainfall, it added, would be around 105% of the LPA - long period average (1971-2020) which is 87cm. Last week, Skymet, a private weather forecaster predicted a normal monsoon at 103% of long period average. Even factoring in a margin error of 5%, India is in for copious rains this year. IMD has put the probability of above normal monsoon at 59%. However, parts of Northwest, Northeast and peninsular India, it said, may get below normal rainfall.
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How was the monsoon in recent years?
The monsoon in 2024 was the best in four years. As per IMD’s end of monsoon data, the country received 935mm of rainfall as of September 30, 2024. That puts the overall precipitation at 8% more than the LPA, which is 870mm. Last time the country received higher rainfall was in 2020 when it exceeded the normal level by more than 10%. In recent years the Southwest monsoon has not failed to disappoint. Between 2019 and 2024, only in 2023 did the precipitation fall slightly below the LPA at 821mm. In other years it has delivered copious rains.
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What can play spoilsport?
El Nino, a weather pattern caused by unusual warm sea surface in the Central and Eastern equatorial Pacific Ocean, causes the Southwest monsoon to underperform and deliver less precipitation. Fortunately, IMD has said that El Nino factors are neutral and are expected to remain so till June when monsoon sets in. Also, La Nina conditions - cooler sea surface in the pacific, are strong and this typically cause good rainfall.
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Why a normal monsoon is critical for India?
With almost 50% of the agricultural land in India remaining rain-fed, farmers depend a lot on monsoon to water their crops. Even lands that are well irrigated depend on water from storage and a good monsoon fills the reservoirs. Most importantly, a normal monsoon does not mean just good quantum of rains. The rains should be well distributed during the season to enable the farming process. Continuous excessive rain or a long gap between rains will cause distress. A copious and well distributed monsoon will mean higher agricultural output and leave farmers with better earnings.
How will it benefit the economy?
Higher agricultural output will ease food prices and consequently, food inflation. Lower inflation will set the stage for the Reserve Bank of India to reduce interest rates. Today, Indian economy is constrained by lower consumption. A good monsoon will accelerate the revival in rural consumption. Lower interest rates and recent sops in the form of income tax rate reductions, could revive urban spending which has slumped recently. A consumption revival could trigger private investment. Higher consumption and increased private investment supported by government spending will accelerate economic growth which in 2024-25 is estimated at 6.4%.
