The bleak monsoon forecast by the Indian Meteorological Department has the potential to shave off 0.5 per cent of the GDP forecast of 7.9 per cent of fiscal 2016, said Crisil in a report.
A second straight year of weak monsoon will decrease the efficacy of irrigation ecosystem and hit agricultural output and farmers adversely. In addition, unseasonal rains since early March have already had a negative impact on many crops, it added.
Given weak investment climate, tepid export growth and fragile consumption, a normal monsoon is crucial to push economic growth this year, it said.
Without predicting the effect of El Niño, IMD on Wednesday said the monsoon to be at 93 per cent of the long period average with a margin of error of five per cent on either side.
If El Niño indeed plays out, it will be for the second straight year. It impacts spatial distribution of rainfall, causing floods in some parts and drought in others. And this time, the impact on agricultural output will be greater compared with last year, said Crisil.
“Our base case, given a normal monsoon, is that agricultural growth will be 3% -- up from a weak base of 1.1% in fiscal 2015,” it said.