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Monsoon woes: Is India prepared?
Wed, 11 Jul Pre-Open

It seems to be a tough year for the Indian economy. As if the European debt troubles, falling rupee and rising fiscal deficit were not enough, there is one more front for India to struggle. For an economy where almost half of the population is reliant on agriculture, late arrival of monsoons spells huge trouble. While agriculture remains a direct victim, if things don't change for the better, the industrial segment won't be behind either. This is because power supply is the backbone for industrial production. Lack of timely monsoons will affect hydroelectric power generation at a time when other fuels are facing supply constraints.

As 17% of the GDP comes from farm economy, late or weak monsoon could mean a further slowdown in the Indian economy, causing it to slip to levels even lower than 5.3%. This could lead to shortage of food supplies and higher food prices pushing inflation back to double digits. Also, it will impact rural income adversely thus changing the consumption patterns. Since a substantial share of revenue for FMCG comes from rural consumption, any slowdown there is bound to drag the sector. The other probable victims will be fertilizer industries and farm equipment manufacturers.

While we can't blame the Government for weak or late monsoons, it certainly deserves some blame for not ramping up infrastructure which would have reduced dependence on rainfall. Also, it highlights the need for better management of food stocks for smooth sailing in case a crisis strikes. To conclude, while monsoons are the lifeline of the Indian economy, we need to work further on our survival systems for a stable economy.

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