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Understanding the impact and significance of monsoon data as a key macro-economic variable

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In the past few months, a key macro-economic variable that has grabbed headlines in business dailies is monsoon data. Notably, the coverage dedicated to reporting on monsoon data has been both consistent and comprehensive.

Unlike a few years ago, where this level of monthly reporting was absent, the present focus stems from the concerns that an inadequate monsoon could pose for both the economy and the private sector. In fact, a large section of commentators are of the view that the data about monsoon has become increasingly important given the evolving monsoon patterns in the past few years.

Given these facts, let us understand why monsoon data has acquired such significance in recent months. Here is the low-down on this:

THE RAIN STORY

Monsoon data heavily influences economic sentiments. In the Indian context, monsoon data provides a roadmap as to how corporate revenues may change when compared to previous fiscal periods. This is largely because monsoon data has a far-reaching effect on the agriculture sector. In fact, statistics shared by private sector companies and government in the first half of a fiscal year, pretty well sum up the way the second half of a fiscal year may shape up. These statistics attract a great deal of attention of analysts, economists and policy-makers.

Let us first understand the significance of monsoon data as a sentiment booster in the Indian economy.

India is an agrarian country. This makes India’s dependence on monsoon high. It is estimated that the Southwest Monsoon (SWM) rains, which fall between June and September of a year, provides large amount of water to unirrigated lands in India. It is estimated that the Southwest Monsoon provides around 70% of India’s total annual rains.