In India, around 60 per cent of the agricultural land is still dependent heavily on the monsoon. The lack of irrigation facilities compels the farmers to gamble with the monsoon. If you look at other natural phenomena which can affect the economy significantly, there is no other natural phenomenon that comes close to the monsoon, which has a significant impact on the Indian economy. So, the drops of rain that we receive from the monsoon not only provide water to crops but also to India’s economic development, impacting food inflation to major policy decisions.
When we analyse the last decade comprehensively, from 2014 to 2024, to look at the monsoon’s economic impact, what we observe is: during the periods of normal rainfall, agricultural GDP increased by an average 3.8 per cent. However, when the country faces deficit rainfall, agricultural GDP growth is limited to 1.2 per cent, according to RBI 2003 data. Such kind of fluctuations and instability in the agricultural performance have a direct effect on rural consumption. And we know that rural consumption accounts for approximately 50 per cent of the country’s household consumption, according to NSSO data 2023. Substantiating with the fact that in 2018 when rainfall was 9.4 per cent, below the average rainfall in India, the country experienced contraction in agriculture output by 2.1 per cent, food inflation increased by 6.8 per cent and rural demand for durable goods sharply declined by 14 per cent year-on-year basis, reported by the Ministry of Statistics and Programme Implementation 2019. On the contrary, the 2020 monsoon proved beneficial for the country, where rainfall exceeded the normal rainfall by 9.7 per cent, leding to a bumper harvest, which eventually helped the country in controlling food inflation despite having severe disruptions in the supply chain nationwide, reported the Economic Survey 2021.
The impact of monsoon is indeed not limited only to agricultural activities, but extends beyond various sectors of the country. The times when countries faced insufficient rainfall, such as 2014, 2015 and 2018, a decline of approximately 8 per cent in two-wheeler sales was observed. These sales are regarded as a robust indicator of the rural demand. According to Nielsen-IQ 2022 data, the FMCG (Fast Moving Consumer Goods) sector experienced a sharp disparity between rural and urban demand, which is around 3.5 percentage points during the rainfall-deficit periods. Additionally, the monsoon is quite crucial to the residential and industrial sectors. For example, water collected from reservoirs during the monsoon is used to operate hydropower plants in India, which eventually affects the generation of electricity. Such fluctuations and unstable conditions of the monsoon contribute to electricity costs, particularly during low rainfall times, putting additional pressure on industrial units.
The Indian Meteorological Department (IMD) is optimistic this year regarding the monsoon, which is projected to be near normal. It means if rainfall occurs promptly with minimum variance across regions, the economy will be better off, keeping other factors constant. So, a potential outcome in this case would be a reduction in food inflation. Although food inflation is already low, around 3.16 per cent, it could be further reduced and alleviate the pressure on households. Additionally, favourable monsoon conditions are also anticipated to enhance direct agricultural output, contributing 0.4 per cent to 0.5 per cent of India’s GDP this year. In the context of the rural economy, where demand lags behind urban demand by 2.6 per cent over the past years, a favourable and evenly distributed monsoon could increase expenditure in smaller towns, villages and lower-income groups. In effect, the RBI, facing normal rainfall, could also ease monetary policy measures because historically, whenever the country experiences a normal monsoon, the RBI has successfully controlled inflation. At the same time, it has implemented policies supporting economic growth, as per the RBI bulletin 2024.
A period where climate change is rewriting the rules and changing the established norms. A country’s significant dependence on rainfall presents a concerning scenario, revealing the structural deficiencies within the sector. If we look at the past decade, 2014-2024, India has experienced quite an increase in adverse climatic events such as irregular rainfall, which has increased by around 43 per cent, according to the Indian Meteorological Department. And dry spells during the monsoon also increased by 8 per cent, according to the Indian Institute of Tropical Meteorology. Such shifts in the climatic conditions have considerable economic costs, which are estimated by the Ministry of Finance as approximately 0.7 per cent of the country’s GDP annually. Secondly, the inadequate irrigation facilities and infrastructure always remained a central problem in agriculture in India. As you know, still half of the farmland has direct or indirect access to irrigation only, as reported by the Ministry of Water Resources 2024. However, desegregated land seems increasing by only 5.6 percentage points over the past decades.
Now, as we see the monsoon of 2025 approaching, the short-term economic outlook will largely depend on the rainfall patterns across the country. However, in the long term, India must strategically invest in irrigation infrastructure. Particularly the resource-efficient systems, like drip irrigation and so on. Promoting climate-smart agriculture actively as a need of the hour, and to adapt rural houses, rural livelihoods need to be diversified. So as long as these changes are not made, Indian agriculture will continue to gamble with the monsoon that could have a broader impact on the economy.
The author is Assistant professor of Economics, School of Business Management, NMIMS Hyderabad
Published on May 18, 2025
In India, around 60 per cent of the agricultural land is still dependent heavily on the monsoon. The lack of irrigation facilities compels the farmers to gamble with the monsoon. If you look at other natural phenomena which can affect the economy significantly, there is no other natural phenomenon that comes close to the monsoon, which has a significant impact on the Indian economy. So, the drops of rain that we receive from the monsoon not only provide water to crops but also to India’s economic development, impacting food inflation to major policy decisions.
When we analyse the last decade comprehensively, from 2014 to 2024, to look at the monsoon’s economic impact, what we observe is: during the periods of normal rainfall, agricultural GDP increased by an average 3.8 per cent. However, when the country faces deficit rainfall, agricultural GDP growth is limited to 1.2 per cent, according to RBI 2003 data. Such kind of fluctuations and instability in the agricultural performance have a direct effect on rural consumption. And we know that rural consumption accounts for approximately 50 per cent of the country’s household consumption, according to NSSO data 2023. Substantiating with the fact that in 2018 when rainfall was 9.4 per cent, below the average rainfall in India, the country experienced contraction in agriculture output by 2.1 per cent, food inflation increased by 6.8 per cent and rural demand for durable goods sharply declined by 14 per cent year-on-year basis, reported by the Ministry of Statistics and Programme Implementation 2019. On the contrary, the 2020 monsoon proved beneficial for the country, where rainfall exceeded the normal rainfall by 9.7 per cent, leding to a bumper harvest, which eventually helped the country in controlling food inflation despite having severe disruptions in the supply chain nationwide, reported the Economic Survey 2021.
The impact of monsoon is indeed not limited only to agricultural activities, but extends beyond various sectors of the country. The times when countries faced insufficient rainfall, such as 2014, 2015 and 2018, a decline of approximately 8 per cent in two-wheeler sales was observed. These sales are regarded as a robust indicator of the rural demand. According to Nielsen-IQ 2022 data, the FMCG (Fast Moving Consumer Goods) sector experienced a sharp disparity between rural and urban demand, which is around 3.5 percentage points during the rainfall-deficit periods. Additionally, the monsoon is quite crucial to the residential and industrial sectors. For example, water collected from reservoirs during the monsoon is used to operate hydropower plants in India, which eventually affects the generation of electricity. Such fluctuations and unstable conditions of the monsoon contribute to electricity costs, particularly during low rainfall times, putting additional pressure on industrial units.
The Indian Meteorological Department (IMD) is optimistic this year regarding the monsoon, which is projected to be near normal. It means if rainfall occurs promptly with minimum variance across regions, the economy will be better off, keeping other factors constant. So, a potential outcome in this case would be a reduction in food inflation. Although food inflation is already low, around 3.16 per cent, it could be further reduced and alleviate the pressure on households. Additionally, favourable monsoon conditions are also anticipated to enhance direct agricultural output, contributing 0.4 per cent to 0.5 per cent of India’s GDP this year. In the context of the rural economy, where demand lags behind urban demand by 2.6 per cent over the past years, a favourable and evenly distributed monsoon could increase expenditure in smaller towns, villages and lower-income groups. In effect, the RBI, facing normal rainfall, could also ease monetary policy measures because historically, whenever the country experiences a normal monsoon, the RBI has successfully controlled inflation. At the same time, it has implemented policies supporting economic growth, as per the RBI bulletin 2024.
A period where climate change is rewriting the rules and changing the established norms. A country’s significant dependence on rainfall presents a concerning scenario, revealing the structural deficiencies within the sector. If we look at the past decade, 2014-2024, India has experienced quite an increase in adverse climatic events such as irregular rainfall, which has increased by around 43 per cent, according to the Indian Meteorological Department. And dry spells during the monsoon also increased by 8 per cent, according to the Indian Institute of Tropical Meteorology. Such shifts in the climatic conditions have considerable economic costs, which are estimated by the Ministry of Finance as approximately 0.7 per cent of the country’s GDP annually. Secondly, the inadequate irrigation facilities and infrastructure always remained a central problem in agriculture in India. As you know, still half of the farmland has direct or indirect access to irrigation only, as reported by the Ministry of Water Resources 2024. However, desegregated land seems increasing by only 5.6 percentage points over the past decades.
Now, as we see the monsoon of 2025 approaching, the short-term economic outlook will largely depend on the rainfall patterns across the country. However, in the long term, India must strategically invest in irrigation infrastructure. Particularly the resource-efficient systems, like drip irrigation and so on. Promoting climate-smart agriculture actively as a need of the hour, and to adapt rural houses, rural livelihoods need to be diversified. So as long as these changes are not made, Indian agriculture will continue to gamble with the monsoon that could have a broader impact on the economy.
The author is Assistant professor of Economics, School of Business Management, NMIMS Hyderabad
Published on May 18, 2025
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It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution
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