Can monsoon rain turn the economy around? Government believes so
There is more to the summer rains than the romance of pitter-patter. Besides providing relief from a sticky summer, the monsoon is also the life-blood of India’s economy. HT reports.business Updated: Aug 30, 2013 23:22 IST
There is more to the summer rains than the romance of pitter-patter. Besides providing relief from a sticky summer, the monsoon is also the life-blood of India’s economy.
With the economy battling to claw out of a sharp slowdown, and the rupee at historic lows suggesting another round of inflation, the mood is not just right for an interest rate cut.
Can monsoon rain turn the economy around? The government believes that it can.
India’s agriculture output grew 2.7% during April to June this year, down from 2.9% last year, latest data released ib Friday showed.
“Growth has slowed down in recent quarters. I expect growth in the first quarter of 2013-14 to be relatively flat, but as the effects of the good monsoon kick in, I expect it to pick up,” Prime Minister Manmohan Singh said in Parliament hours before the government released the first quarter GDP estimates.
When rain-dependent farm output is robust, rural income and therefore spending on almost everything — television sets to gold, from personal care products to processed food — goes up. This creates demand for manufactured goods, which, in turn, helps the general economy. A normal monsoon could, thus, be the perfect antidote for the crippling industrial slowdown.
Rural buyers account for close to 40% of India’s total motorcycle consumption. Likewise, about 40% of India’s cement demand is driven by rural housing.
“With good monsoons, agricultural growth is expected to pick up this year,” said Naina Lal Kidwai, president of industry body Ficci.