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Should India brace for a dry spell ahead?
Apr 25, 2014


The value of rains for smooth functioning of Indian economy can hardly be underestimated. In India, food production is largely at the mercy of monsoons. Further, food constitutes major component of price basket and hence determines inflation and guides monetary policies. As such, monsoon forecasts are a matter of great interest for all.

This time, at the centre of these predictions is a phenomenon called El Nino. For those who are new to the term, El Nino obstructs rains and has been a cause for draught in India in 2002, 2004 and 2009. Going by the weather forecasts, we have reasons to worry. As per India Meteorological Department (IMD), the chances of a drought and sub normal rainfall are 23% and 56% respectively. It is not just low rainfall, but its distribution as well that will impact the agricultural output. The weather office has predicted the rainfall in four month monsoon period at 95%. This is a tad below the long period average (LPA) that ranges from 96% - 104%.

It is important to note here that while the share of agriculture has come down in GDP, it still is a key driver of economy of rural areas where 60% of India's population resides. Our best hope is that the actual rainfall overshoots the forecasts. And keeping history in mind, it is quite a possibility. After all, in the last six years, the actual rainfall has surpassed the forecasts 50% of the times. Whatever be the case, we hope this will wake up authorities to make agriculture self sufficient and not just rely on nature.

Data source: Economic Times & IMD

This Chart Of The Day was published in The 5 Minute WrapUp - Why Warren Buffett chose to stay silent on this issue..

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