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[RSTV Archive] Normal Monsoon and Economy

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IMD had predicted normal monsoon for 2021. However, initial estimates show that some states may not get enough rain.

In this article, we shall learn how this will impact economic growth, especially when other sectors are still reeling under Covid-19 impact.

What is Monsoon?

  • Monsoon is traditionally a seasonal reversing wind accompanied by corresponding changes in precipitation.
  • It is now being used to describe seasonal changes in atmospheric circulation and precipitation associated with annual latitudinal oscillation of the Intertropical Convergence Zone between its limits to the north and south of the equator.
  • Usually, the term monsoon is used to refer to the rainy phase of a seasonally changing pattern, although technically there is also a dry phase.
  • The term is also sometimes used to describe locally heavy but short-term rains.

What defines a Normal Monsoon?

The Indian Meteorological Department (IMD) calls a monsoon season:

  • ‘Normal’ when the total amount of rainfall in the country between June and September is within 10 per cent (plus or minus) of the average rain over a long period.
  • ‘Deficit rainfall’ is when it drops below the margin of 10 per cent of the average.
  • ‘Excess rainfall’ is when it exceeds the average by more than 10 per cent.

What is the LPA method?

  • The IMD uses long period average (LPA) method to forecast the monsoon.
  • LPA represents the average annual rainfall received by India during the southwest monsoon over the five decades from 1961 to 2010.

Why is it so important to have Normal Monsoon?

A good monsoon usually brings renewal and recovery, especially when times are grim. The right amount of rainfall brings the promise of a bumper harvest, boosting rural incomes and demand, driving an essential economic cycle.

(1) Crop success

  • The monsoon is critical for agriculture in the country since nearly 60% of India’s net arable land lacks irrigation.
  • The monsoon delivers about 70% of India’s annual rainfall and determines the yield of several grains and pulses, including rice, wheat, and sugarcane.
  • India is the world’s biggest producer of sugar, cotton and pulses, and the second-biggest producer of wheat and rice. 

(2) Food inflation

  • More importantly, higher agriculture yield would mean lower pressure on food prices and the overall retail inflation.
  • A normal south-west monsoon should help to contain food price pressures, especially in cereals and pulses.
  • It is also crucial to keep up the rural demand.

(3) Drinking water

  • The rains also replenish nearly 100 large reservoirs critical for drinking water and power generation across the country.
  • In the event of deficient rains, cities such as Chennai, Mumbai, and Hyderabad will be forced to cut water supplies.

(4) Demand spur in the economy

  • Most major sectors of the economy like to base their sales and distribution activities on the monsoon’s behavior.
  • For example, if the monsoon fails, lower production of foodgrain would mean lower demand for diesel to transport goods.
  • A company involved in sales and distribution of automotive fuels would like to cut down production before the demand plummets.
  • From share markets and betting houses to the collections at temples and sales of vegetables, the monsoon affects everything.

(5) Hydro Energy

  • A normal monsoon will also lead to reservoirs across India, which are responsible for water supply in cities, filling up.
  • Thus it  will also lead to an increase in production of hydro power which is a cleaner form of energy.

Importance of Monsoon for the Agriculture

  • When the first wave of Covid-19 cases ravaged the economy in 2020, it was the agriculture sector, powered by an above-average monsoon, that saved the economy and millions who depend on agriculture, both directly and indirectly.
  • Nearly half of India’s farmland has no irrigation and is dependent on monsoon rains, which account for 70-90 per cent of annual rainfall.
  • Farming accounts for almost 15 per cent of India’s GDP and employs nearly 42.6 per cent of the workforce.
  • While the share of Indians employed in the sector is declining, it remains a critical sector.

Public sentiments associated

  • Normal monsoon will also improve the sentiment in rural India which has witnessed many coronavirus cases and deaths.
  • It will lead to an increase in income of farmers and provide a boost to rural demand which has been facing pressure in the second wave.

Significance for post COVID recovery

  • A normal monsoon would ensure that inflation remains in the band of 4%-6% as targeted by the Reserve Bank of India.
  • Low inflation will help the Reserve Bank of India to continue with its stance of keeping interest rates low. Generally, central banks resort to an increase in interest rates to tackle high inflation.
  • Low rate scenario is required at a time when Indian economy is battling from the economic fallout of the pandemic.

Issues in Monsoon Prediction

  • One may complain about the “unreliability and uncertainty of rainfall prediction in India.
  • In recent times, the unpredictability of monsoons has increased significantly with the impact of global warming that has resulted in climate change all over the world.
  • For climate scientists, determining the location, extent, and intensity of the ITCZ is the biggest challenge and in recent times it has become more difficult due to climate change and other factors like El Nino, a global climate cycle that disrupts the path of trade winds.
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