Top economist plays down weak monsoon

NEW DELHI: Concerns about India’s weakest rains in over a century slowing growth shouldn’t be overstated, as the economy has gone a long way from being too reliant on the monsoon, according to a top adviser to the Finance Ministry.

The August monsoon rains are a concern, but there are adequate buffer stocks of food staples, V. Anantha Nageswaran, who is the chief economic adviser to the government, told Bloomberg in an interview.

“We have come a long way as an economy from being overly monsoon-dependent, given the advances we have made in irrigation coverage,” said Nageswaran, who published a book in 2016 titled Can India Grow? Challenges, Opportunities, and the Way Forward.

“I don’t think we should overstate the worry. Sowing in some regions is low, but irrigation levels and reservoir levels are good enough to offset that,” he said.

Normal rains this month could help make up some of the shortfall just as the monsoon season winds down, and there are also El Nino-driven dry spells to consider.

These conditions have stirred concerns about lower crop production, prompting the government to restrict some grain exports to curb retail prices that climbed to a 15-month high in July.

But Nageswaran, who was a former chief investment officer with Julius Baer, expects inflation to ease in the coming months as the harvests come in and higher imports of pulses occur.

Core inflation, which strips volatile food and fuel prices, is also easing, he said.

India is expected to power through the second quarter of the financial year, Nageswaran said.

The data for April to June gross domestic product released last week showed the fastest expansion in a year due partly to strong growth in investment and private consumption.

Government spending is helping India’s real estate and construction activity, said Nageswaran.

“The consumption activity will also remain quite robust.”

Rising crude oil prices could put a spanner in the works for India’s government, with the national elections slated for next year.

The crude oil basket averaged US$86.43 a barrel in August, which was the highest in nine months, but Nageswaran that said the global slowdown, particularly the environment in China, would almost certainly have an impact.

“These demand restraints will also have an influence on oil prices,” he said. — Bloomberg