Rains: Come again - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Rains: Come again

May 6, 2003

FY03 was a bad year for Indian agriculture. The advance estimates by the Central Statistical Organisation suggest that agricultural production is expected to touch a new low in FY03. As per the economic survey, food grain production is expected to register a 14% decline in FY03 to 183 MT, as most of the major producing states are faced with severe drought like situation. A significant deviation in monsoon from the normal level has had a big impact on the farm sector. But what has been the case historically? We take a look at the performance of the agricultural sector in the current fiscal based on the rainfall estimates and try to gauge the outlook for this important contributor to India’s GDP.
Source: Central Statistical Organisation

As can be seen from the graph above, in the last four years, the performance of the SouthWest rainfall that occurs between June-September has been disappointing. The month of July, which witnesses nearly 1/3rd of the total rainfall, saw a drop of 49%, the lowest in the last 100 years. The magnitude of deviation has been severe in FY03 with this monsoon just 81% of normal levels. The number of regions that have seen scanty rainfall in FY02 stand at 21 out of the total 36, the highest since the late 1980s.

Poor monsoons led to a decline in the production of food grains. During FY03, the output is estimated to have slid to 183 m tonnes. This has been largely due to the low production of rice and wheat, which contribute to a major part of the output. Rice output was lower by 15 m tonnes and wheat production saw a shortfall 3 m tonnes over the previous year. There was a decline in the output of cereals and pulses too. As a result, agricultural sector growth saw a dip of 3.1%, which is likely to adversely affect the GDP growth rate for the current fiscal. The GDP is estimated to slowdown to 4.4% in FY03, which is lower than 5.4% growth in FY02.

The agricultural sector contributes around 24% to the country’s GDP and employs around 70% of the working population. Hence its contribution is crucial for India’s economic growth as quite a few industries are dependent on rainfall. For instance, in the auto sector, the tractor segment relies on monsoons. For the full year 2003, industry sales are expected to fall by 20% over the previous period. Apart from this, the FMCG sector is also dependent on monsoons, as around 50% of the total FMCG revenues (excluding the food segment) come from rural and semi urban areas.

Given this backdrop, what does FY04 look like? The Indian Meteorological Department has projected monsoons that will be 96% of long period (June-September) average monsoon in FY04. But is it a big reason for worry?

Maybe not. "If you look at the records on agricultural growth, if monsoons actually turn out to be 96%, and if there’s no problem of distribution, then we will actually have a strong recovery in agricultural output from a very large fall last year. This is because last year the actual rainfall was only 82% of the long period average. The previous 3-4 years also have had, on an average, 98% or below rainfall, and it was only in 1992-97 that we had more than 100% rainfall..." – Dr. Rakesh Mohan, Deputy Governor, The Reserve Bank of India. Read the complete interview

Equitymaster requests your view! Post a comment on "Rains: Come again". Click here!


More Views on News

Ride the Indian Real Estate Revival with this 'Different' Smallcap Stock (Profit Hunter)

Mar 23, 2021

Affordability in the housing segment has never been so good in last one and a half decade. Here's how you could make the most of it...

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

Don't Break These 5 Intraday Trading Rules (Fast Profits Daily)

Jun 1, 2021

To become a better intraday trader, follow these rules religiously.

Is the RBI's 'Bubble Talk' Signalling a Market Crash? (Profit Hunter)

May 31, 2021

Is the Indian central bank correct in warning you about a market crash?

Rs 2 Trillion Stimulus Coming to a Stock Market Near You (Profit Hunter)

Jun 2, 2021

Get ready to profit from a massive stimulus that you've never seen before.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms