India's consumption, GDP growth to get boost from 'La Nina'

NEW DELHI: The probability is improving for a La Nina event leading to a good monsoon in India which could provide a major boost to consumption, investment and GDP growth, says a Deutsche Bank report.

According to the global financial services firm, this year could throw up positive surprises for the country.

"In order to alleviate rural distress, India needs bountiful rainfall, with proper spatial and temporal distribution. Consequently, a La Nina event could provide a major boost to consumption, investment and GDP growth," Deutsche Bank said in a research note.

According to the report, an analysis of over 30 year data indicates strong positive correlation between La Nina and India's key macro/rural indicators.

As per the analysis, average annual rainfall in La Nina years has been 5.3 per cent above long term average and rural economy also posted strong growth during these years.

"Agri GDP in La Nina years grew at an average 7.8 per cent y-o-y as against an average of 2.3 per cent y-o-y in non La Nina years," the report says.

The report further noted that the positive impact of La Nina is amplified further if it is preceded by an El Nino year, a situation similar to the current year.

On its impact on GDP numbers the report said the broader economic indicators like - GDP, private consumption and investments growth also exhibit similar trends in La Nina years, averaging 8.9 per cent/7.4 per cent/10.4 per cent y-o-y growth - significantly higher than average growth of 5.8 per cent/5.2 per cent/7.2 per cent respectively in non La Nina years.

Meanwhile, the Indian Meteorological Department has forecast 2016 monsoon rainfall to be 106 per cent of long term average assigning 94 per cent probability to normal or above rainfall.