City Sunday

Monsoon ’20 critical to shield India Inc from rainy days

This year’s Monsoon season more than crude oil prices will decide the economic fortune of India, industry stakeholders contended.

Accordingly, the weather phenomenon has re-attained the importance it once enjoyed, as this time around it will not just have an impact on agriculture, but bearings on employment generation, auto sales, and demand for everything from cement to steel.

Bluntly, the Indian monsoon will no longer just be important for agriculture but for the whole of India Inc as well as government finances, as Covid-19 induced slowdown will hinder manufacturing, services and demand growth.

Private weather forecaster Skymet’s Chief Executive Yogesh Patil pointed out that this year’s Monsoon season will be critical not just for agriculture alone but the whole of the economy.

“Good Monsoon is critical for India this year. Last year was surprisingly good till September, but excess rains during September-October devastated crops at many places in India,” Patil said.

“We were hopeful that because of a good monsoon the Rabi should be great for farmers, but due to COVID-19 and lockdown, the farmers are facing multiple issues… from finding labours for harvesting, storage availability, transporting agri produce, finding the right market price… Considering all these issues now, the relevance of a good monsoon this year has become critical for the rural economy.”

Consequently, the rural economy is where the heart of India’s consumption this year lay, this segment of consumers buy nearly a majority of two-wheelers, cement, steel and a host of other products.

“Agriculture is expected to be a significant contributor to the growth of the economy this time a little more than the normal as the season begins now,” Sridhar V, Partner, Grant Thornton India LLP, said.

“The pandemic and the growth of agriculture will play a critical role in the demand for 2 wheelers as public transport will be shunned for some time to come. All in all, agriculture is expected to be a strong catalyst for the steel cement and auto sector growth.”

And it’s not just two-wheelers, weather impacts everything from energy prices to media consumption, aviation safety to food costs and much more said Himanshu Goyal, India Business Leader, The Weather Company, An IBM Business.

“For an agrarian economy such as India’s, the impact of monsoon extends beyond agriculture. Most banks and NBFCs operate in this sector, whose performance is directly proportional to the quality of crops and farm output. Thus, monsoon has a major effect on the ability of farmers and businesses to borrow and pay back loans as well as avail insurance,” Goyal said.

“Such dependency on monsoon is not just limited to banks and NBFCs either. Industries such as logistics, energy and utilities, aviation and several others are significantly impacted by the monsoon.”

According to ICRA Principal Economist Aditi Nayar, the forecast of a normal monsoon for 2020 comes as a relief amid the ongoing health crisis, with its associated negative impact on economic activity.

“A well-distributed monsoon in conjunction with the abundant reservoir levels in seasonally adjusted terms should support a 3.5-4.5 per cent agricultural growth in FY2021,” Nayar said.

“Nevertheless, the spatial and temporal distribution of precipitation will remain crucial for timely sowing and harvesting.”

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