Impact of Monsoon on the Indian Economy
The India Meteorological Department (IMD) has forecast a sub-normal monsoon this year. However, the economic impact of this forecast may be limited.
Factors Limiting Economic Impact
- Improved forecast accuracy by IMD.
- Reduced dependence on monsoon-sensitive crops with a shift towards more resilient agricultural segments.
Farm Sector and Overall Growth
The farm sector's influence on overall economic growth has decreased over time.
- In FY14, farm and allied sectors' gross value added (GVA) contracted, and growth was minimal in the subsequent year due to a deficient monsoon. Despite this, overall GVA growth remained between 7.2-8 per cent during those years.
- Other years have also shown a similar pattern.
Farm Sector's Share in Overall GVA
While it's incorrect to claim that the economy is entirely decoupled from the farm sector, the sector's share in India's GVA has decreased.
- In FY26, the farm sector accounted for 16.78 per cent of India's overall GVA, down from 18.20 per cent in FY15.
Changes in Agricultural Composition
Monsoon variability significantly impacts crops, leading to fluctuations in crop GVA during deficient years like FY14 and FY15.
- The share of crops in farm GVA dropped to 54 per cent in FY25 from 62 per cent in FY15.
- Conversely, the share of livestock increased to 31 per cent from 24 per cent over the same period.
