India’s economic growth would suffer “significantly”, though not “catastrophically”, and inflation would rise, if delay in monsoon causes reduction in farm produce, Moody’s said.
“The monsoon problem has negative implications on economic growth... the damages will be significant, though not catastrophic,” Moody’s economy.com economist Sherman Chan told PTI when asked about economic implications of delay in monsoon.
Moody’s said that as the monsoon is crucial to the farm business, the downside effect of its delay will be evident in the agricultural component of the GDP data.
Agricultural output typically represents less than 20 per cent of the country’s GDP compared with service-related sectors which account for more than 50 per cent, Chan said.
However, there would also be a spillover effects to other sectors, she said.
“For instance, a slump in agricultural output will hurt the income of some businesses and households. This will in turn weigh on business investment and household consumption, so service-related sectors may also feel a bit of the squeeze caused by the monsoon problem,” she explained.
Moody’s further said that delay of the monsoon also an upside risk to India’s inflation outlook.