Weak monsoon to hit India’s economy

A weak monsoon season will not only impact agricultural production, but also subdue consumption and consequently slowdown the country’s economic growth.

According to a report authored by Sreejith Balasubramanian, Economist (Fund Management), IDFC AMC, a weak monsoon which is already on cards will hit private consumption expenditure more than food inflation as India has enough buffer stocks.

“Any serious shortfall in monsoon rainfall would most likely impact agri production and private consumption expenditure more than food inflation,” the report said.

“The food inflation impact of monsoon rainfall has been waning more recently due to abundant cereal stocks, higher impact from perishables, government supply side measures and the meagre weight coarse cereals have in the CPI basket,” it said.

However, a weak monsoon will prolong the depressed consumer sentiment, thereby hitting sales, stalling industrial expansion and hindering job creation.

The development could not have come at a worse time, as rural agrarian distress due to lower food prices and near stagnant wage growth levels has hit the economy hard. The south west monsoon rainfall season is a crucial driver of rural sentiment and consumption expenditure, as more than 70 per cent of India’s annual rains occur during this period, it also coincides with the Kharif crop sowing season. Around 50 per cent of food grain cultivation in India continues to be rain-fed.

“While a production hit could dampen rural income and consumption, the inflation impact, if any, could occur only if production of rice or pulses are majorly hit because coarse cereals have a very low weightage of 0.4 per cent in the Consumer Price Index (CPI) unlike rice (4.8 per cent) and pulses (2.4 per cent)...” the report said.

Agencies