The meteorological department on Tuesday predicted above average monsoon rains, bringing cheer to the farm sector that has been struggling under back-to-back droughts. Monsoon rains are extremely important for India because they provide water to half of the country's farmlands that lack irrigation facilities.
Here are five ways how normal monsoon impacts the country:
1) Adequate monsoon rains will help raise agricultural productivity, adding to the country's GDP growth. Agriculture accounts for 14 per cent of India's $2 trillion economy.
2) Normal monsoon will revive the farm sector, which has been weighed down by subdued agriculture output and falling farmers' income. The farm sector supports two-thirds of the country's population.
3) A revival of the farm sector can boost rural demand, the missing piece in domestic economic growth. Rising rural demand can kick off consumption for a variety of goods such as two-wheelers and boost economic growth.
4) Normal monsoon rains can help check food inflation, an important determinant for interest rates in the country. Lower inflation will not only help bring down interest rates, but also boost the value of rupee.
5) Hopes of above average monsoon rains have given fresh wings to domestic stock markets. The BSE Sensex, which had rallied 350 points yesterday, rose 123 points today, while the broader Nifty ended above the key 7,700 levels. Sachin Shah, fund manager at Emkay Investment Managers, told NDTV Profit that monsoon will be the biggest factor that will set the direction of Indian stock market this year.
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