Monsoon no longer determines India's economic fate?
The Indian Express has a rather giddy article about monsoons and the economy. It was an article of faith growing up that if/when the monsoon failed on a particular year, the country’s economy would suffer greatly. Apparently, this is not true any more.
Monsoon grip on India’s economy weakens
The early arrival of India’s annual monsoon promises good crops and incomes for millions of farmers but economists say the rains no longer hold such a sway over Asia’s third-largest economy as they used to in the past.
It is true that agricultural now contributes to 22% of the economy as opposed to 38% in 1980. But, this kind of economic cheerleading is foolish. As the article itself admits, 700 million people live off farming related activities. India’s irrigation infrastructure is poor. The crop growing cycles are based primarily on the monsoon rains, their timing, the rain volumes during certain months, etc. You really think that an event that adversely affects 700 million people won’t devastate large swathes of the country?
Economists place way too emphasis on single macro variables. The relevant variable here is 700 milion!