The Indian METEOROLOGICAL Department’s (IMD’s) prediction of a normal monsoon—it has predicted monsoon at 96% of the long-period average (LPA), at the lower end of the 96-104% range for such classification—for the second year in a row may help in recovering from the setback to GDP growth in FY17. While agriculture has seen an uptick in growth—it increased 4.9% over the last year compared to 0.7% in FY16, owing to a record foodgrain output of 273.38 million tonnes—it is important that the sector’s momentum is retained well into FY18 for India to achieve the 7.4% growth target. With investment still sluggish and credit growth languishing, it is important that agriculture drives growth in this fiscal.
In the absence of a manufacturing-and-services push, agri-economy and rural demand are critical for better GDP growth in FY18. The monsoon hitting Indian shores on time is good news not just for the economy, but also for IMD, as its forecasts seem to be on target for the second year in a row. Although it has had a poor track-record for predicting rainfall, the new technology and estimation techniques it has adopted should make fairly accurate predictions possible. In fact, last year IMD had predicted a 107% figure, while the actual was 97%. This year, it has made the “96%” forecast, with a much higher probability (38%) than last year’s.