Early Monsoon To Do More Damage Than Good For Economy?

The early arrival of monsoon in India has sparked both concern and optimism regarding its economic implications. While initial reports highlight significant damage to perishable crops like tomato and onion, this industry expert encourages a broader perspective, emphasising the long-term benefits of a robust monsoon season.

The immediate impact has been visible in agriculture as Nashik has reported the destruction of over 3,000 hectares of onion crops, and southern states recording price hikes in certain commodities due to crop damage. Abneesh Roy, executive director of research at Nuvama, urges against undue concern.

"I will not be unduly concerned as perishable crops do see impact from rains, that is simply the nature of those crops," he states. Roy emphasises the bigger picture, pointing to multiple forecasts predicting a good monsoon, which he sees as "the more important thing".

While some segments like carbonated drinks, talcum powder, and ice creams may experience a dip in demand, overall, the demand outlook remains positive, according to Roy.

A good monsoon is intrinsically linked to rising rural incomes. As Roy explains: "If there is a good monsoon, rural income goes up."

This improved purchasing power in rural areas stands as a pillar of overall economic growth. Further, successful harvests contribute to a reduction in food inflation for the entire year, despite what Roy calls "blips" in prices of specific commodities like tomatoes and onions.

He also highlighted that the prices of these commodities had soared to Rs 100 during the previous year.

For non-perishable sectors such as paint and construction, the rainy season merely postpones demand rather than diminishing it.

"People will do it (paint) after the rains so its postponement than structural demand worry," Roy said. This suggests that while there might be a short-term pause, the underlying demand remains strong, poised to rebound post-monsoon.

Despite initial challenges, the expert pointed out that early rain may be a net positive for the Indian economy, fuelling stable food prices and boosting rural income.