Strong monsoon forecast lifts growth prospects
The Financial Express. New Delhi, 11 May 2016
After back-to-back droughts battered India’s farmers, a forecast for above-normal rainfall this year is brightening the outlook for Asia’s third-largest economy. Economists at DBS Bank Ltd, State Bank of India and Standard Chartered Plc say India’s gross domestic product (GDP) this year may grow more than they previously predicted if the monsoon is as good as the government’s initial forecast in April. The June-September rains water more than half of the nation’s farmlands, making them crucial for the more than 70% of Indians who depend on agriculture. “A higher number” for GDP growth is possible in the year through March 2017 if the monsoon turns out to be among the stronger ones, said Anubhuti Sahay, head of South Asia economic research at Standard Chartered. Her current forecast is for a 7.4% expansion. A revival in the countryside would ignite another engine for India’s economy, which is expanding below potential despite boasting the fastest growth rate among major emerging markets. It would also be a political boon for Prime Minister Narendra Modi, who has sought to counter rising discontent in villages ahead of key state elections with a pledge to double farmer incomes by 2022. This year’s monsoon is particularly important after the first consecutive droughts in three decades left vast tracts of India reeling. The India Meteorological Department (IMD) on 12 April forecast that the monsoon would be 106% of the 50-year average rainfall, which would be the best since 1994. Many economists already factored normal rainfall into their forecasts. The median of 32 surveyed by Bloomberg expect 7.7% growth in the year through March 2017, compared with the government’s official projection of as much as 7.75%.
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