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Effects of Monsoon on Economy

Updated on June 22, 2013

Monsoon Season and its impact on economy

Monsoon does play an important role on the economy of a country. Economy of a country depends on Agricultural, Industrial sector especially in a country like India. In India, agriculture provides around 70% of employment either directly or indirectly. This is the major reason for the economic growth of India to depend on Monsoon season. Monsoon season in India starts from June and continue till September. If the monsoon is good, it boosts up the economy of the country and helps in maintaining GDP growth. But if monsoon rains get delayed even by 15 days, it becomes a cause of worry for the government to maintain GDP growth. As per the estimates given by India Meteorological Department, monsoon, this year in 2013 have shown good signs and is on track. Monsoon rains have already hit Mumbai on June 9th, a day ahead that was predicted. Monsoon has already been 28 per cent excess since its onset over Kerala on June 1.

Monsoon rains have already covered almost the entire country around 15 days in advance. Rains have created flood like situation in several Northern states including Uttarakhand, Himachal Pradesh and few other states. Cloud bursts along with rains created a havoc like situation in many parts of Uttarakhand state, where thousands of people are either stranded or missing. Few thousand people are already declared dead.

According to the India Meteorological Department (IMD), rainfall in July will be 101 per cent of the long-term average and 96 per cent in August. It is also expected that rains will start soon along the western coast, parts of Maharashtra, Andhra Pradesh, Odisha, West Bengal and in the north eastern states.

Rainfall in Last Year:

As per the estimates given by India Meteorological Department, rains in 2012 have not been so good. Rainfall in June saw a 31 percent deficit and 82 per cent of the area of the country, including the states of Punjab and Haryana, have received deficient or scanty rainfall. Many parts of Maharashtra and Punjab were declared as drought-hit as they received less than 50% rainfall by mid August 2012.

If the rainfall would have been normal as were in 2010 and 2011, it could have encouraged government to ease curbs on export of wheat and rice, and good rainfall would have boost output of grain and oil seeds, and help calm inflation. Rainfall in North India were delayed by over 20 days and India's largest dam, the Bhakra Nangal, reached a critical level. There was a similar situation at other reservoirs in the North, which worsened the power situation further with major outages across Punjab, Haryana, and Delhi.

In 2011, as per MET, monsoon rains hit the country’s southern coast two days ahead of expectations and helped boost the country’s output of grain and oil-seeds. After covering southern India, Monsoon entered Maharashtra and the monsoon rains were 12 percent above normal in the first week. Though, rainfall in July, the wettest month of the monsoon season experienced less rainfall than expected. Showers in August were forecast at 101 percent, according to the weather office and the seasonal rainfall in the country seen 97 per cent of the long period average at 635.1 mm against the normal of 652.3 mm.

Effects of Less Rainfall

In southern part of India, monsoon rains hit in the second half of June 2009, but northern part of India did not receive enough rainfall by July. In Delhi, capital of the country, there was not much rainfall even in the month of July. Due to the shortage of rainfall, prices of agricultural products went up and affected consumers drastically. Rising temperature also affected power supply of many districts, which was also a reason for the increase in prices. In some parts of North-India, less monsoon rains affected several crops severely and caused the condition of drought in several states of India, especially in Bihar, which has witnessed 60 per cent deficit in rainfall.

It seems that this year too, the country will face the similar problems as were faced in 2009. Monsoon season has a direct impact on agricultural sector, which has an impact on industrial sector as well, particularly for FMCG companies which depends on agricultural and rural market. It also causes shortage of water supply for production of power and electricity. Electricity shortage has a strong effect on almost all sectors, which also causes delay in productions or increase in costing of products.

dry paddy waiting for monsoon
dry paddy waiting for monsoon

Effects of Monsoon Rains

Monsoon rains has an impact on several crops of different states in India. It impacts the sowing of groundnut in Rajasthan and Gujarat, soya-bean in Madhya Pradesh and Maharashtra and paddy in Uttar Pradesh. Kharif crop also gets affected due to the delay of rains. Rains also affect the production of rice, millet, sugarcane, oilseeds and cotton. As per the metrological department, rains were 31 percent below normal till the end of June which is badly affecting the farming sector.

Less rain affects the purchasing power in rural areas and contract demand for products and services. With the global recession still pertaining, India is depending on the domestic demand which mainly comes from rural India. To reduce the dependency on monsoon, Indian government needs to take some action and provide improved infrastructure for the agricultural sector in the following budget and literate the farmers about the latest technologies and equipments to use, rather than depending on monsoon rains.


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