India monsoon and impact on economy
India's June-September monsoon rains are a key factor for global commodities markets as they influence output of various crops in India, which is among the world's leading producers and consumers of wheat, rice, sugar and edible oils.
April 11, 2011 / 22:42 IST
India's June-September monsoon rains are a key factor for global commodities markets as they influence output of various crops in India, which is among the world's leading producers and consumers of wheat, rice, sugar and edible oils.
Farming constitutes about a fifth of the country's gross domestic product (GDP), where about 60% of people live in rural areas.The seasonal rains usually start in the southern Kerala coast on June 1 and cover half the country by the first week of July.About half of India's farm output comes from crops sown during the four-month long monsoon season.The increased soil moisture from the rains is important too for key winter crops like wheat and rapeseed.The following are facts on the monsoon and its impact:Crops:Rice: Indian farmers plant paddy at the start of the monsoon season. The key areas for rice are the eastern and southern regions.The crop is heavily dependent on rains for irrigation. A bumper harvest last year means India has ample stocks. But exports are still banned -- apart from select non-basmati grains -- and normal rains could prompt the government to ease curbs on overseas sales. Any decision is likely to come after end-July, when the monsoon impact is clearer.Soybean: A vital crop for the world's top importer of edible oils. Higher oilseed output would rein in the growth of edible oil imports and increase oilmeal exports.Sugarcane: The world's top sugar producer after Brazil could allow exports of the sweetener in the next season from October 1 if rains are favourable for output. India has said exports of 500,000 tonnes can be made from in the current 2010/11 (Oct-Sept) sugar year.Others: Corn, lentils and cotton, important crops in western and central India, also depend heavily on the seasonal rains. India remains a net importer of lentils.Irrigation, powerMonsoon rains replenish reservoirs and increase ground-water levels, allowing better irrigation and higher generation of hydropower.About 40% of India's arable land has irrigation facilities. The rest depends on the monsoon rains.Higher rainfall levels can also reduce demand for diesel, used to pump water from wells for irrigation when rainfall is scant.Economy and marketsIndia is largely self-sufficient in major foodstuffs such as rice and wheat, but drought can send the country to international markets, as it did in 2009 when India had to import sugar, sending global prices to record highs and pushing inflation up.Ample monsoon rains lift domestic demand, as higher farm output increases the incomes of rural people, who account for about two-thirds of India's 1.2 billion population.Higher demand for goods and services can boost economic growth. Also, inflation could ease because a better supply of crops would lead to lower prices and take the pressure off the government to step in with fiscal measures and extra subsidies.A stronger economic outlook can lift sentiment in equity markets, particularly of companies which sell products in rural areas, including consumer goods and automobiles. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
