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Why monsoon is so important for the Indian Economy

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Indian monsoon and its impact
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Indian monsoon and its impact

Monsoon has progressed more slowly than usual after hitting Kerala nearly a week late. Monsoon rains have been 44% lower-than-average so far in June, delaying the sowing of summer-sown crops and raising concerns that parts of the country could face a worsening drought.

This shortfall could have a major impact on consumer demand, the overall economy and financial markets.

The India Meteorological Department (IMD) has forecast average rainfall in 2019, while the country's only private forecaster Skymet has predicted below-normal rainfall.

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​What are the monsoon types?
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​What are the monsoon types?

A normal, or average, monsoon means rainfall between 96% and 104% of a 50-year average of 89 cm (35 inches) in total during the four-month monsoon season from June to September, according to the IMD's classification.

Rainfall below 90% of the average is classified as deficient, the same as a drought. In 2018, India received 9% lower rainfall than normal, although in some regions the deficit was as high as 37%.

Rainfall above 110% of the average would mean an excessive monsoon, which could cause flooding and reduce the yields of certain crops.

The monsoon season starts with rains on the southern Kerala coast around June 1, and usually covers the country by the middle of July.

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​Does the delay mean lower rainfall?
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​Does the delay mean lower rainfall?

There are instances when the monsoon delivered average or above average rainfall even after arriving late or progressing slowly.

In 2016, the monsoon landed in Kerala on June 8 but covered the entire country by July 13 and delivered average rainfall. Other times, rainfall deficits in June were fully offset by a week of raining in July.

The monsoon delivers about 70% of India's annual rainfall and determines the yield of rice, wheat, sugarcane and oilseeds, such as soybeans. Farming makes up about 15% of India's $2.5 trillion economy but employs more than half of its 1.3 billion people.

Rising farm output from a decent monsoon boosts demand for consumer goods in rural regions.

A stronger economic outlook tends to lift the stock prices of companies focused on selling products in rural areas.

India is self-sufficient in rice and wheat, but a drought would increases imports of pulses and edible oils, such as palm oil, soyoil and sunflower oil. Monsoon rains replenish reservoirs and groundwater, allowing better irrigation and more hydropower output. Higher rainfall can trim demand for subsidised diesel, which is used to pump wells for irrigation.

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​Why is the monsoon key for PM Modi?
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​Why is the monsoon key for PM Modi?

Modi has promised to double farmers' income over five years and promised to boost the economy.

Makers of consumer products are reporting poor rural demand. Depleting reservoirs have forced cities including Chennai, Mumbai and Hyderabad to cut water supplies.

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