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October 08, 2018

CRISIL Insight: Looking beyond ‘normal’ rains

Three takeaways from the south-west monsoon

After the hat-trick


The curtains are down for the southwest monsoon in 2018. The season has ended with rainfall 9% short of the long period average (LPA), which is considered normal by the Indian Meteorological Department (IMD), thus marking three straight years of normal monsoon.


The last time the country saw a hat-trick was from 2010 to 2013 – four years of normal rains at the all-India level – that gave an average agriculture GDP growth of 4.7%.


For the current period, agriculture growth could trail this number, yet will be well above the trend. But there are some spoilers. Farmer income, for one, is down. Rainfall distribution has been patchy.


The good news is that the rural non-farm side is seeing better days compared with its other rural counterparts. Also, given healthy production, food inflation might stay contained. Depending on the government’s procurement efficacy, the announced higher MSPs may offer a mild upside to food inflation.


We look at these in detail as we cover the following aspects of rains and the rural economy:

  • Performance of the southwest monsoon in 2018
  • What it means for rural incomes (both farm and non-farm)
  • The outlook on food inflation