Effects of Monsoon on Economy

Monsoon does play an important role on the economy of a country. Economy of a country depends on Agricultural, Industrial sector especially in a country like India. In India, agriculture provides around 70% of employment either directly or indirectly. This is the major reason for the economic growth of India to depend on Monsoon season. Monsoon season in India starts from June and continue till September. If the monsoon is good, it boosts up the economy of the country and helps in maintaining GDP growth. But if monsoon rains get delayed even by 15 days, it becomes a cause of worry for the government to maintain GDP growth. But as per the estimates given by India Meteorological Department, rains this year in 2011 are expected to be normal as were in 2010, which could encourage government to ease curbs on export of wheat and rice, and good rainfall will boost output of grain and oil seeds, and help calm inflation.

As per MET, monsoon rains hit the country’s southern coast two days ahead of expectations and would help boost the country’s output of grain and oil-seeds. After covering southern India, Monsoon has entered Maharashtra and the monsoon rains were 12 percent above normal in the first week. Last year, many parts of Northern India witnesses monsoon rains and heavy rainfall which caused a lot of havoc and created a flood-like situation in several districts and states of North India. Rainfall in July, the wettest month of the monsoon season experienced less rainfall than expected. Showers in August were forecast at 101 percent, according to the weather office and the seasonal rainfall in the country seen 97 per cent of the long period average at 635.1 mm against the normal of 652.3 mm.

Effects of Less Rainfall

In southern part of India, monsoon rains hit in the second half of June 2009, but northern part of India did not receive enough rainfall by July. In Delhi, capital of the country, there was not much rainfall even in the month of July. Due to the shortage of rainfall, prices of agricultural products went up and affected consumers drastically. Rising temperature also affected power supply of many districts, which was also a reason for the increase in prices. In some parts of North-India, less monsoon rains affected several crops severely and caused the condition of drought in several states of India, especially in Bihar, which prompted the government to drop import tax on a number of commodities, including sugar. Monsoon season has a direct impact on agricultural sector, which has an impact on industrial sector as well, particularly for FMCG companies which depends on agricultural and rural market. It also causes shortage of water supply for production of power and electricity. Electricity shortage has a strong effect on almost all sectors, which also causes delay in productions or increase in costing of products.

Monsoon rains has an impact on several crops of different states in India. It impacts the sowing of groundnut in Rajasthan and Gujarat, soya-bean in Madhya Pradesh and Maharashtra and paddy in Uttar Pradesh. Kharif crop also gets affected due to the delay of rains. Rains also affect the production of rice, millet, sugarcane, oilseeds and cotton. As per the metrological department, rains were 51 percent below normal till the second half of June which is badly affecting the farming sector.

Less rain affects the purchasing power in rural areas and contract demand for products and services. With the global recession still pertaining, India is depending on the domestic demand which mainly comes from rural India. To reduce the dependency on monsoon, Indian government needs to take some action and provide improved infrastructure for the agricultural sector in the following budget and literate the farmers about the latest technologies and equipments to use, rather than depending on monsoon rains.