June – the first month of India’s crucial monsoon season is about to end and here’s a small highlight: The India Meteorological Department (IMD) has said that the country has received only 64.5 mm of rainfall between June 1 and 18, which is 20% lower than the long-period average (LPA) of 80.6 mm. 

(LPA is the average rainfall recorded for a period over the past 50 years.)

This lacklustre beginning comes on the heels of an intense heat wave earlier this year, offering little reassurance following the unpredictable monsoon of 2023 which was quite erratic resulting in an overall deficit of 6% compared to its LPA.

Do you know who was the main culprit behind this? It’s a ‘Little Boy’ – also known as ‘El Niño’ in Spanish. The El Niño phenomena occurs when ocean surface temperatures rise, leading to a drought in some regions and excessive rain in others. 

On the other hand, there is also a La Niña phenomena which means ‘Little Girl’ in Spanish, that occurs with cooler ocean temperatures and triggers opposite weather patterns. 

In India, El Niño often brings weaker monsoons and droughts, while La Niña can result in stronger monsoons and heavier rainfall. 

For more information about El Niño & La Niña, you can check this explainer video here.

Over the past seven decades, El Niño has struck 15 times, with India experiencing below-normal rainfall in nine instances. Basically, El Niño is bad news for our agricultural sector and economy by and large. 

Here’s how:

High dependence on monsoon: In India, even today 61% of farmers rely on rain for agriculture. Hence, a plentiful and well-distributed monsoon is crucial. El Niño events typically lead to a slower growth in agriculture, which in turn affects GDP. 

Higher Inflation: El Niño results in lower harvests, leading to elevated levels of food inflation.

Strain on water resources: Erratic monsoons have strained India’s water resources. The recent heatwave has exacerbated the issue, causing water shortages in many cities, including Bengaluru.

Reduction in rural income and demand: Lower harvests directly impacts farm incomes, leading to a reduction in rural consumption demand. This decline was evident in the decreased sales of tractors. When rural consumption falls, it creates a domino effect on other sectors of the economy, particularly Fast Moving Consumer Goods (FMCG).

Impact on GDP: The lack of consistent rainfall eventually reflects in our GDP. A study by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) stated that a 5% deficit in rainfall due to the El Nino factor could result in a loss of ₹1,80,000 Cr or 1.75% of the GDP !!

But there is some good news on the horizon…

According to the IMD, El Niño has officially ended in June and India is likely to experience an above-normal monsoon, with cumulative rainfall estimated at 106% of the LPA (a 6% surplus) by the end of the monsoon season. This is despite the rainfall in June being underwhelming. Let’s hope IMD’s prediction comes true this year.

A normal rainfall would not only support agricultural productivity, ensuring better harvests and food security, but also help replenish water reservoirs, stabilise ecosystems, and support the livelihoods of millions who depend on predictable weather patterns.

Till the next time,

Vijay

CEO – InCred Money

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