1. Normal monsoon prediction set to cheer India Inc: India Ratings

Normal monsoon prediction set to cheer India Inc: India Ratings

The second consecutive year of normal monsoon will help revive consumption demand, which was severely affected by the de-legalisation of Rs 500 and Rs 1,000 notes.

By: | Published: June 8, 2017 6:27 PM
Monsoon, Monsoon in India, Monsoon in Kerala, IMD, India Meteorological Department, LPA, Skymet, KJ Ramesh Not just a normal forecast brings cheer but more importantly, the spread of monsoon over space and time is forecast to be normal.

Noida: The India Meteorological Department’s southwest monsoon forecast for 2017 at 98% of the long period average (LPA) is good news not only for the agriculture sector, but the economy as a whole, says India Ratings and Research (Ind-Ra). The second consecutive year of normal monsoon will help revive consumption demand, which was severely affected by the de-legalisation of Rs 500 and Rs 1,000 notes.

Not just a normal forecast brings cheer but more importantly, the spread of monsoon over space and time is forecast to be normal. Rainfall in July 2017 and August 2017, the most crucial months for crop sowing, is expected to be 96% and 99% of LPA, respectively, and bodes well for agricultural output. Even the water storage available in 91 major reservoirs of the country for the week ending on 1 June 2017 was higher than last year by 128% and 105% of the last 10 years, which augurs well for kharif sowing.

The southern peninsula, which had below normal rainfall last year, is forecast to receive seasonal rainfall at 99% of LPA. North-West and North-East India is forecast to receive seasonal rainfall at 96% of LPA. Ind-Ra believes this is however unlikely to have a major impact on agriculture production compared to the previous year.

Ind-Ra expects a second consecutive year of normal rainfall to boost demand for fast moving consumer goods, two-wheelers, tractors and rural housing (in turn benefitting iron, steel and cement) sectors. It will also have a positive impact on hydro power projects. A number of small hydro power projects located in the southern peninsula were adversely affected last year and are thus likely to attain higher plant load factor this year.

The agency expects gross value added (GVA) to grow 7.3% in FY18 compared to 6.6% in FY17 and agricultural GVA to grow by 3% (4.9%), based on the normal monsoon forecast. Anecdotal evidence suggests the impact of de-legalisation of currency on the cash dependent informal sector has been significant. Though to a lesser extent, even the formal sector has felt the pain, due to both cash crunch and its linkages with the informal sector. Thus, the normal monsoon forecast brings cheer to the economy as a whole.

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