Weak monsoon hits India’s economic recovery

India drought.jpg

Monsoon rainfall accounts for 60% of farm irrigation in India, Asia’s 3rd largest economy. This monsoon season, it has so far been about 2/3rds of the 10 year average. Last week it was 56% below normal.

Although agriculture accounts for just 17% of the economy, the lack of rainfall will also damage the whole rural economy, which has remained robust through the economic crisis. It accounts for more than half of India’s domestic consumption, and so total GDP will probably reduce by 1% – 2%.

Industrial production has been strong recently, up 7.8% in June versus 2008, even though exports fell 28%. But as Finance Minister, Pranab Mukerjee noted Friday, although “the economy has started moving slightly, other problems may come from adverse impact of scanty rainfall.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.


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