India’s monsoon is 30 per cent behind average and analysts are getting worried.
Jefferies’ Arya Sen warns that a sub-par monsoon could add to growth and inflation concenrs:
With FY13 GDP growth forecasts for India already at 5-6.5% for most on the street, a poor monsoon and its direct and indirect impacts could pose further risk to GDP growth. In the last decade, in the poor monsoon years of FY03 (-19%), FY05 (-14%) and FY10 (-22%), agricultural GDP growth has been -6.6%, 0.2% and 1.0% respectively against median growth of 3.5%. In FY12 agriculture contributed 14% to India’s overall real GDP. The indirect impact could take various forms such as weaker rural demand and lower hydroelectric power production. A poor monsoon could also further drive up India’s already high food and overall inflation with implications for RBI’s decision making. Food items account for 24% in the WPI basket.
At least India’s grain reserves may be high enough to avoid a food crisis, Sen says.
India has already been described as the weakest BRIC.
The monsoon—aka the real finance minister of India—lasts from mid-May to late-October, and it can recover from a bad June, but it is unlikely to recover from a bad July, Sen says. Better watch those weather maps.
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