With a “good” monsoon in the bag Indian GDP should exceed 11%

The 4 month monsoon season in India ended on 30th September and total rainfall was 2% over the long term average, about 25% higher than last year and about 5% above the long range forecast made in the spring.


Total rainfall 2010 Monsoon: IMD


Expectations that a good monsoon could lead to double digit growth are stronger with the IMF now predicting a 9.7% growth rate for the calendar year 2010.

“India’s macroeconomic performance has been vigorous, with industrial production at a two-year high. Leading indicators — the production manufacturing index and measures of business and consumer confidence — continue to point up,” the IMF said.

“Growth is projected at 9.7 per cent in 2010 and 8.4 per cent in 2011, led increasingly by domestic demand. Robust corporate profits and favorable external financing will encourage investment,” it said.

“Recent activity (10 per cent year-over year growth in real GDP at market prices in the second quarter) was driven largely by investment and the contribution from net exports is projected to turn negative in 2011 as the strength in investment further boosts imports,” the IMF said.

But in spite of the IMF’s caveat on net exports turning down, I think the trickle-down effects of a good monsoon may have been under-estimated. Agricultural growth which was low should pick up and domestic demand will ensure the industrial growth continues. For the Fiscal Year 2010/11 (till 31st March 2011) I fully expect that the GDP will grow by just over 11%.

The establishing La Niña probably helped the monsoon somewhat.

A “moderate to strong” La Niña, which appeared in July, was now well estabished according to the WMO, and forecasts showed “rather a strengthening of this La Niña episode for the next four to six months.” La Niña is characterised by unusually cool ocean temperatures in the eastern equatorial Pacific and has been associated with strong rainfall in Asia and Australia, bitter cold snaps in North America, as well as drought in South America.


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