Good monsoon may lead to better GDP performance: Report

CHENNAI: A good monsoon has been one of the only rays of hope in the prevailing economic gloom. Analysts say, it could lead to better than expected GDP ( gross domestic product) performance, given the strong correlation between agri-GDP and overall GDP.

According to a report by Motilal Oswal Securities, "years of 3.5 per cent plus agri-GDP growth have rarely coincided with sub-5 per cent GDP growth (exceptions were observed as far back as early 1970s)." While there's no immediate connect between agriculture and industry and services, "the correlation between agri-GDP and overall GDP growth has been found to be very strong. This is explained by the synergies generated by higher agricultural growth," said the report.

Sowing has progressed rapidly so far on the back of a good monsoon season with nearly 80 per cent of the normal area under kharif crop already covered. Sowing for cash crops (cotton, sugarcane and jute & mesta) has already exceeded their normal area. Among foodgrains, sowing for pulses, coarse cereals and oilseeds has also comfortably exceeded the area covered in the corresponding period of the previous year. However, sowing of rice has been slow on account of lower rainfall in the East. "There is a strong correlation between rainfall and kharif agricultural production. This year too, another bumper foodgrain production is expected on the back of good monsoon," said the report.

Marketers are already looking at the rural market to make up for some of the loss of urban demand. Mass market car companies like Maruti and Hyundai, for example, have been focusing attention away from creamy layer metro markets to buck the current slowdown. Already 25 per cent of Hyundai Motor India's overall sales come from rural markets and for Maruti that percentile is even higher at 28 per cent. Every sector, from consumer durables to FMCG, services to automobiles are now looking to tap the rural market which is smaller than the creamy layer urban markets but far less affected by the current slowdown.