At long last, there is some good news. The economy is set to get a real boost should the spell of two successive droughts be broken this year by an above-normal monsoon. According to two private meteorological predictors, this year is set to get 106 percent rains of the long period average. These predictions were endorsed by the India Meteorological Department on Tuesday. The IMD endorsement has added further value to the prediction of a better- than- usual monsoon, given that last year it had stuck its neck out, ruling out a normal rainfall even though a private weather predictor had made such a forecast.
Monsoon is considered normal if in the June-September period rainfall is 96-104 percent of the long period average. Eighty percent of the annual rainfall normally takes place in the June-September period. South-west monsoon is critical to the breaking of the dry spell. Rural distress will certainly get alleviated somewhat should we have normal or above-normal rains this year. The petering out of the El Nino phenomenon that was behind the two droughts on the trot is set to bring relief to the hard-pressed farming community.
Indeed, a good monsoon will most likely ease the perennial water crisis in parts of the country, notably in Maharashtra. Above all, it will boost farm growth which has lagged in recent years. Even the industrial sector is set to get a demand-boost from the spurt in the rural economy in case of an above-average monsoon. In fact, latest figures for industrial output too brought cheer to the markets, rising two percent in February after falling for three consecutive months. Data released by the Central Statistics Office on Tuesday revealed that mining and power sectors registered five percent and 9.6 percent growth.
However, manufacturing, which has a 75 percent weightage in the index of industrial production, grew by a mere 0.7 percent. Equally worrisome was the fact that the capital goods sector contracted for the fourth consecutive month at 9.8 percent in February. But consumer goods production saw a robust 9.7 percent growth in February, signaling a rising urban demand. With more money flowing into the market due to the disbursal of arrears under the One-Rank-One-Pension settlement and the potential pay-out as per the Seventh Pay Commission recommendations, industrial sector could experience what the RBI Governor Raghuram Rajan said the other day ‘a leap in production.’
Rajan, who tends to be conservative in setting growth targets, however, seemed to be quite positive about the economic prospects in the near-future. He exuded confidence about the manufacturing and services sector gaining further traction in the coming months. Notably, the International Monetary Fund too projected a healthy 7.5 percent growth for 2016-17. Remarkably, IMF cut global economic growth by two percentage points to 3.2 in 2017.
The international lender expects India’s growth to be higher by at least 1.3 percent than China’s, making India the fastest growing large economy in the world. Growth in India, IMF said, would be driven by private consumption, which “has benefited from lower energy and higher real incomes.”
However, IMF has yet again envisaged the need for reforms, particularly in the labour sector, and the need to remove bottlenecks in the infrastructure sector.
Admittedly, these are tasks which the NDA Governments at the Centre and in the States have undertaken in hand, with the Vasundhra Raje Government taking the lead in doing away with some of the most retrograde and irrelevant provisions in the labour law, a lead followed by other BJP governments, including in Madhya Pradesh. As for the bottlenecks, a lot has been done by the central government, particularly in the roads and highways sector, though, a lot more needs to be done.
For this, the cooperation of the Opposition and in quite a few cases the nod of the higher judiciary might be absolutely necessary. Power sector is another area where a lot of work has been done by the energetic young minister, Piyush Goel, but due to the long gestation periods, these changes would take time to yield actual results. In short, as the Modi Sarkar finishes its first two years in office in late May, there might be tangible gains on the economic front.
