Home » Rainfall and the economy

Rainfall and the economy

May 3, 2015

 Abstract: Though there is an obvious relationship between rainfall, food production and prices, a simplistic view that a deficient monsoon necessarily implies higher inflation and negative macroeconomic effects is challenged. The linkages between the monsoon and the economy can be summarized as follows:

  • The monsoon needs to be significantly below normal for the entire season for food prices to accelerate across the board;
  • Timing and geographic spread of rainfall are the critical determinants of outcomes;
  • The adverse impact of poor monsoon on aggregate rural demand is limited if only the least affluent areas (which are usually also most rain-dependent) are affected; and
  • Even when inflation and aggregate demand are only moderately affected, safety nets for the hardest hit rural areas are recommended.

Keywords: monsoon; agriculture policy; food policy; food inflation

Click here for original article