Awash with expectations

Timely arrival of the southwest monsoon spells good news for India's macro

Published 7 years ago on May 30, 2017 1 minute Read
Ajit Solanki

In line with the forecast of the India Meteorological Department, the monsoon showers have announced their arrival on the southern coast in Kerala today. The weather office predicts the rainfall to be at 96% of the long-term average and this augurs well for India's agrarian economy. On the back of an expected increase in farm output, ICRA has predicted a 3.6% growth for agriculture in FY18.

The agricultural sector accounts for 15% of India's $2 trillion economy and is largely dependent on the monsoon, which makes up for 70% of the nation's annual rainfall. Rising farm income translates into higher demand for consumer durables, automobiles, cement, FMCG and farm inputs. The cement industry is slated to benefit significantly from the normal monsoon. An ICICI Direct report predicts that the pickup in rural housing will drive demand for cement to 323MT by FY19. The report also states that the positive pricing trend will continue, due to the demand pick-up in north India.

Apart from this, the auto sector is also gearing up for a postive outlook. In its FY18 outlook, SIAM has predicted 7-9% growth in the passenger vehicle sector; 4-6% for commercial vehicles; 9-11% for two-wheelers and 4-6% for three-wheelers. It claims that rural demand for cars is witnessing an upward trend, which is bound to rise further in the wake of a normal rainfall. Seems like the timely arrival of the monsoon has given these sectors a good reason to smile this season.