INSUBCONTINENT EXCLUSIVE:
considered a grave risk for agriculture but also for India Inc as well as government finances
In recent years, while farmers have been protected by various government interventions, it is India Inc that has felt the direct impact of
will be hit hard by such a weather phenomenon."India's agriculture has become more resilient to monsoon-related shocks on the back of
wider irrigation coverage, better quality seeds and timely weather related information
However, a monsoon shock may still cause a drop in agricultural income which could be minimised by government policy intervention," said
India Ratings and Research (Fitch Group) director and principal economist Sunil Kumar Sinha."But in hindsight, FMCG and automobile sectors
which look for their incremental growth from the rural sector will get impacted, especially at a time when agrarian distress is already
pronounced, visible and impacting consumption demand."According to Skymet CEO Yogesh Patil, though crops like cotton and pulses will suffer
from a poor monsoon and the demand-supply gap will aid in lifting farm output prices, nevertheless, industries as diverse as banking,
petroleum (diesel), FMCG and automobiles will suffer from it."Consecutive below normal monsoon will result in lower loan disbursal, strained
loan recoveries and rising NPAs (non-performing assets) and it will definitely put strain on major rural sector lending banks and NBFCs," Mr
Patil told news agency IANS."Diesel consumption will also take a hit in such a scenario of below-average monsoon."Besides inducing a
slowdown in demand, the weather phenomenon can also change the composition of the government's budgetary commitments -- as funds earmarked
for capital expenditure might be diverted to implement schemes to protect farm incomes."Even the government's fiscal management might get
affected as more resources will be required to support the farm sector," said Mr Sinha of India Ratings.In any case, the need for
comprehensive fiscal support measures will grow louder as a slowdown has become evident in sectors such as automobile, FMCG and aviation.The
automobile sector has been impacted the hardest and a weak monsoon might accentuate this slowdown
Off-take data for May paints a grim picture with domestic passenger car sales down 26.03 per cent to 147,546 units.In the commercial vehicle
segment which is a key indicator of economic activity, domestic sales were down 10.02 per cent at 68,847 units last month.Similarly, overall
sales of two-wheelers, which include scooters, motorcycles and mopeds, declined 6.73 per cent to 1,726,206 units.Consequently, slipping
demand has forced OEMs (original equipment manufacturers) to curtail production thus stalling hiring levels and wages."Automobile sector,
just like any other consumer driven sector, is highly dependent on rural demand and in turn monsoons, as it is the most important factor
which determines the rural spend for the entire year," said Grant Thornton India partner Sridhar V.
