Data Not reliable.

Post economic downturn, every one of us might have heard representatives from ruling government coming over the mike and expressing there view regarding the inflation and GDP growth. Expressions of these estimates were very frequent and were not governed by a single spokesperson slowly it become a routine in our life to come across through varied figures of growth and inflations through various sources. Whoever found a forum to address took an opportunity to share his estimates of inflation and GDP.

Ground reality as a citizen I encountered is totally different and opposite to what government claims. I never felt that inflation has cooled off; rather I felt that it is rising with each passing day making survival more difficult. But representatives are claiming that it has cooled off and further cooling will be seen in coming months. GDP can’t be felt on an individual level but the figures disclosed by government are discounted on the bourses, so have less faith on those numbers.

Raising doubt on these numbers might have proved to be a sin if an individual would have dared to, as one’s capability, competency and status would have proved insufficient to question government machinery. But finally someone dared;

A statement from RBI came as a big question to these figures, in its stance RBI said that they cannot make policy decisions relying on the data provided by the government as they are facing severe headwinds on multiple fronts because of the erroneous data published by the government-from advance estimates of GDP to revisions in industrial production (IIP) numbers to the preference of WPI over CPI as the measure for inflation.

Further RBI stated that if the data released by the government is inaccurate then the policy drafted by the central bank may turn out to be suboptimal, though the figures are seen with suspicion, but in the absence of any other alternative, they have to work with unreliable numbers.

In February 2010, the advance estimate for GDP growth for 2009-10 was pegged at 6.8%. Three months later, this was revised to 7.7% while in February 2011, the quick estimates pegged it at 9.1%-a change of over 40% within a year. This sort of projections fails to give analysts and policy makers the true state of the economy apart from hampering policy decisions.

Now as RBI has raised this issue probably the decision makers will address this with little bit of seriousness.

Image source: picasaweb.google.com

Rain Rain went away

Many of us will agree and must have observed that this year Rain God is upset and not in a mood to shower there blessings. I recently visited Pune and places around pune and interacted with lot many peoples (because of my talkative nature) and a conversation with them reveled that there is hardly any rain and whatever shower has been there are far below the average rainfall.

It is almost mid of July and the cities in and around pune have hardly got 2-3 spell of rains and that too for a short duration.

The situation is no more different in states like Gujarat and Madhya Pradesh.

It is almost one month to the onset of South West Monsoon over Andhra Pradesh but there is no sign of rains as empty clouds are hanging around with yielding any rains. As the state recorded a huge deficit of more than 50% deficit in the rain fall in the month of June, serious crisis is looming large on the horizon and specter of drought is staring at the state.

The desert state of Rajasthan has recorded 25 per cent less rainfall than normal this year.
The Haryana government drew up a contingency plan for farmers, as the situation looks grim with monsoon playing truant. The contingency plans chalked out by the government include alternate crops which do not require much water and new production technologies.
The fitful monsoon has created havoc in India's biggest city, Mumbai. Lack of rainfall in catchments has created a critical water shortage. Mumbai authorities last week imposed a 30 per cent cut in town water and have stopped supplying water to non-essential services such as swimming pools.

If things doesn’t change sharply the entire nation will be draught affected, while economic growth has dipped from 9 per cent to 6 per cent in the past 12 months, rural demand has helped underpin the economy.

But a below-par monsoon could wipe a percentage point from India's growth rate this year.

Sources:

http://www.hindustantimes.com/
http://www.theage.com.au/
http://blogs.nature.com/news/thegreatbeyond/drought-crakced-earthGETTY.JPG

How Monsoon can affect my country

Monsoon directly impacts economy because it directly impacts the agriculture (an important segment of the economy) because:

· Agriculture contributes to a one forth of the GDP.
· Agriculture provides raw materials to a fifth of the industry.
· Generate demand for industrial goods.
· Nearly 40 per cent of the manufactured consumer goods are sold in rural areas.
· 60% of the population depends on agriculture for livelihood.

A fall in agricultural production therefore leads to a fall in industrial output. The timely arrival of the monsoon and sufficient rains are thus key for India's economic growth because farmers' success depends heavily on the monsoon rains. Though new growth drivers have emerged in the Indian economy still agriculture is likely to play a very significant role in incremental growth as it did in the past. Indian Economy can absorb the shock of poor rain but it is not immune to. We need to find alternative ways to immunize.

In the time of global meltdown where we are already struggling to increase demand and consumption, and keeping fingers crossed to see a GDP between 7-8% a bad monsoon can drag the figures to 5-6%. Analysts worry that bad monsoon could be even worse for the economy this year.

Some states are already facing a drought like situation, even drinking water is getting supplied only once in ten days. When there is such a scarcity of water there is no question and point discussing water availability for the irrigation purpose and this is a bad news for agriculture and especially to the small farmers.

Some farmers have already tilled their lands and sown their seeds and if rain gets deferred, their seeds will dry up and when the rains do come, the farmer may not be left with any more seeds to cultivate.

Food production will be affected and after three years of good monsoons, a dry spell could spell disaster for a recession-hit Indian economy, with lower food production the prices of agricultural commodities will shoot up.

Indian Two-thirds of the population lives in rural areas and is, directly or indirectly, dependent on the agriculture sector. With failure of crop and lower rainfall more and more rural population will be shifting to urban base and will create a pressure on the overall system.
FMCGs, textile industries, agricultural good industries, industrial goods sell about one-third of their total products in rural areas. A fall in rural income, following a bad monsoon, can substantially change their fate.

According to the Noble report on Indian FMCGs, HUL, 50 per cent of its revenues comes from rural India, while it is 45 per cent for Dabur, 35 per cent for Colgate Palmolive, 30-35 per cent for Godrej Consumer products and 25 per cent for Marico.Falling income from bad crops means that lower demand, lower GDP and a higher draft on available government resources on account of relief measures and in this time of crises government would not be ready for another relief package for the farmers.

A bad monsoon will impact us in many ways and I would like to give a wake up call to save water, plant trees, go echo friendly and reduce carbon emission.

Sources:
http://www.valuenotes.com/
http://ibnlive.in.com/
http://www.deccanchronicle.com/
http://www.financialexpress.com/
http://www.koi-hai.com/gowrimohanakrishnan.html