The India Meteorological Department has predicted that India may get normal monsoon rains in 2023. Economists and analysts said that this is a good sign for the economy and financial markets as well as for domestic consumption-centric companies. In its forecast for the four-month monsoon season beginning June 1, the IMD said the country as a whole is likely to witness a normal southwest monsoon season from June to September, ranging from 96 to 104 per cent of the long period average. Can get it. Monsoon rains are vital to the Indian economy, as they help irrigate more than half of the country’s farmland and affect the prices of food products. A good monsoon also helps in increasing the demand in the rural economy.
Inflation likely to come down
According to Madhavi Arora, chief economist, MK Global Financial Services, a normal monsoon helps bring down inflation. Inflation at the global level is already going down and is likely to come down further with a normal monsoon. Arora said that the reduction in inflation is good for the monetary policy of the Reserve Bank of India. Meanwhile, the IMD also said that the monsoon core zone, which includes most of the country’s rain-fed agriculture, is likely to receive normal rainfall i.e. 94-106 per cent of the LPA.
Rural demand and food inflation assessment necessary
According to Kanika Pasricha, economist at Standard Chartered Bank, the major concern this year has been that the monsoon may be short due to El Nino. He said that the IMD had said in the first LRF that there is a 51 per cent chance that the monsoon may be below normal and now in the second LRF released, it has slightly improved the chances of a normal monsoon. He believes that the timing and distribution of rain will be taken into account to assess the impact on rural demand and food inflation. Pasricha expects inflation to remain below 5 per cent and expects inflation to be 5.3 per cent in FY2024, which is in line with RBI’s projections. The low inflation has helped in reducing the margin pressure of domestic companies.
Domestic consumption will increase
According to Vinod Nair, Research Chief, Geojit Financial Services, the possibility of a normal monsoon will increase domestic consumption. Due to this, benefits will be seen in FMCG, Fertilizers and Sugar sectors and the outlook will improve. The fall in inflation will bring down costs in the coming quarter and improve profit margins for these companies. He said that the consumption sector has seen good figures in the March quarter and margins have improved due to fall in commodity prices. He said that although the volume growth has not been good, the margins of these companies have increased.
RBI will not change
At the same time, economists expect that RBI will not make any change in the repo rate in the next policy meeting. The economist of the government bank says that healthy monsoon will increase agricultural productivity and keep food inflation under control, due to which the financial outlook can remain positive. As long as inflation remains between 4-5 percent, RBI will not make any change in the policy rate. Let us tell you that from May 2022 to February 2023, RBI has increased the repo rate by 2.5 percent and the policy rate has come down to 6.5 percent.