Friday, August 3, 2012

Drought may not severely affect India's growth

                                                              Data source: Business Today

India is facing a drought. This has finally been confirmed by the government. The culprit is the El Nino weather pattern which is expected to reduce the rainfall in the July to September period. The last time India had suffered such a drought was in 2009. As more than 50% of Indian agriculture depends on the monsoons, rain plays an important factor when it comes to food production in India. Food prices have already started heating up as rainfall started to fall short of average. If this continues, food prices would most likely hit new highs.

However, the current drought may not affect India's GDP (Gross Domestic Product) growth as much as it did in the past. Today's chart of the day shows that agriculture's contribution to India's GDP has been consistently declining. In the past, a drought tended to severely affect India's economic growth. But despite 2009 being a drought year, the GDP growth in the financial year 2009-10 (FY10) remained robust.

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