Business Standard reported that, the southwest monsoon so far in 2016, which has been the best in the past few years, has many deeper implications. Good Monsoon and favorable forecasts for the remaining weeks seem to make a positive impact on government finances.
If adequate number of jobs get created in the agriculture sector due to Good Monsoon, the rural development ministry might not need more funds from the central government. This could save the exchequer around Rs 10,000 crores in 2016-17.
The Reserve Bank retained growth projection for the current fiscal at 7.6 per cent but cautioned that sluggishness in global economy may neutralize India’s momentum which has been built up by good monsoon and uptick in rural demand. In its third bi-monthly monetary policy review, RBI said the momentum of growth is “expected to be quickened” by the normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to consumption spending that can be expected from the 7th Central Pay Commission award.
Our View; The impact of Good Monsoon is expected to reduce the government spending and also indicates that the GDP projections for the year of about 7.6% is intact.