Monsoons effect on

International
Business

Submitted By:Akash Jain

Monsoon In India
A four-month season starting from June
An average or normal monsoon means rainfall between 96 and 104 percent of a
50-year average of 89 centimetres
Rainfall below 90 percent of the average is considered a drought.
Rains of more than 110 percent of the average would mean an excessive monsoon
The monsoon season starts with arrival of the rains on the southern Kerala coast
around June 1
Its progress triggers planting of summer crops.

Progress
After hitting the south coast, it takes about a week to cover the coffee, tea and
rubber growing areas of south India.
It spreads to the rice areas of eastern parts in the first 10 days.
It usually covers half of the country in the first fortnight and enters the
oilseed-producing areas of central India in the third week of June.
Cotton areas in the western region get rains by the first week of July.
It covers the entire country by mid-July.
Crops planted in June and July contribute half of India's farm output.
The summer rains also influence winter crops, such as wheat and rapeseed,
grown in irrigated areas that depend on reservoirs filled by the rain.

Economy and markets

The monsoon rains are vital for farm output and economic growth in India
India is world's second-biggest producer of rice, wheat, sugar and cotton
Farm sector shares for about 15 percent of India's nearly $2 trillion economy
India is largely self-sufficient in major food grains such as rice and wheat, but
drought can send the country to global markets.
In 2009, India had to import sugar, sending global prices to record highs and
pushing up inflation.
Higher farm output would rein in food prices and help the government to take steps
to cut the fiscal deficit and farm subsidies.

Economy and markets

contd

By lifting farm output, the monsoon boosts rural incomes, pushing up sales of
everything from consumer goods to cars.
Higher demand from rural consumers, who form two-thirds of the population,
gives critical impetus to growth.
Rains can impact demand for gold in India, as purchases get a boost when
farming incomes rise amid high crop output.
GDP growth, food prices, consumer spending and interest rates are all areas
that can be influenced by the rains.

Monsoon Effect
Good monsoon
increase farm
output and
incomes

Increased
purchasing
power

Stimulates rural
demand

Autos and fastmoving

consumer goods
get boost

Monsoon 2016
India had received rainfall that was 3% below the long-term
average, which is considered near normal.
India recorded rainfall deficit of 14% & 12% in 2015 & 2014.

Effect on Farm-Related Firms

A large part of corporate India has direct connect with the agro
sector
The firms benefiting directly from abundant rainfall relate to
those in the irrigation infrastructure, farm equipment like
tractors, seed development and the food processing
A growth of 17-18 per cent is expected in the sales during the
monsoon season as well as the lean season

Effect on Automobile Sector

Maruti Suzuki,
Hyundai Motor,
Toyota Motor,
Ford Motor and
Two wheeler
makers such
as Hero
MotoCorp and
Honda Scooter
&Motorcycle
are also
expecting
strong sales

Effect on Automobile Sector

YS Guleria, senior vice president of sales and marketing at Honda Motorcycle
& Scooter India, is expecting 20% growth between August and November in
two-wheeler sales.
Turnaround has taken place in rural markets and the momentum is expected
to improve over the coming months once harvest takes place
The incomes typically get spent in the Sept-Dec period, which is also the
festival time on consumer goods including automobiles - especially tractors
and 2-wheelers, which can be scaled up to passenger cars in the lower price
range.

Gold Purchase
Two continuous years of deficit monsoon rain had hurt the income of farmers
and led to a drop in consumer purchases of gold
Gold chains, jewellery and bangles were largely brought by rural households,
which accounts for two-thirds of Indias gold demand.
Gold consumption in India is expected to range between 750 tonnes and 850
tonnes, compared with 864.3 tonnes last year
In the first half of the year, gold demand fell by 30% to 248 tonnes from a year
earlier

Non-performing assets of banks

Positive correlation between low farm output due to a drought
and rise in NPAs
Highest ratio of NPAs to total advances emanates from
Agriculture sector
This number tends to increase when the monsoon does not do
well
A good monsoon can lower the incidence of emerging NPAs

E-Commerce
Key e-commerce players like Flipkart, Amazon, Snapdeal, Jabong, Myntra and
Shopclues recently had their festive sale
Flipkart sold around 2.5 million smartphones
Flipkart sales on October 3 had crossed the Rs 1400 crore mark which is highest
in history.

Amazon India has sold over 15 million units during its Great Indian Festival
The numbers are 3 times bigger than last year.

E-Commerce
Snapdeal stated it sold over 11 million units
during its Unbox Diwali Sale
The company has witnessed 4x increase of
customers from the past years sale.

REASONS
An uptick in rural demand after a good monsoon
The cash coming from the salary and bonus
bonanza of the seventh pay commission.

Sensex
Indian shares fell over 400 points last week amid rising tensions between India
and Pakistan
It was biggest fall since Brexit in June which drove investors out of emerging
markets
Analysts says Sensex will reach a record high of 30,400 by mid-2017, and then
rise further to 32,000 by the end of next year
Similarly NSE will rise to 9,000 by end-2016 and 9,350 by June next year
Governments recent GST bill and stable economic & inflation outlook after
good monsoon rains

Impact on FMCG sector

Good monsoon has good effects on the FMCG sector.
The demand goes up- predominantly in rural areas
Good monsoon increases the purchasing power
Historical information states that FMCG shares do not do well
whenever the monsoon fails.

Impact on power sector

Bad monsoon results in lower water level which causes more
consumption of electricity in rural areas (hydro pumps)
If good monsoon is there then the consumption would be lesser
It results less power cuts which is good for households as well as
other industries

Imports and Exports

Exports and imports are highly affected by Monsoon
India is largest producer of pulses in the world, yet, we have to import 3-4
million tons of pulses every year to meet the demand of 19 million tonnes
This year India may import less sugar than predicted three months ago
after global prices surged to a four-year high
The first normal monsoon in three years boosted the outlook for domestic
crop.
Hence trade surplus or deficit is highly affected by Monsoon

Cement
The cement Companies with a strong rural presence gain from a
good monsoon as heavy construction work goes on and cement
sells.
In times of failing monsoons construction comes to a halt as
customers postpone the purchases of their dream homes until
better times.
Cement and infrastructure stocks lose value and losses to
investors are huge.

Conclusion
The Indian economy is highly sensitive to agronomics and so a
slight change in the pattern of the monsoon affects the food prices
Monsoon season is quite uncertain and it affects many sectors
Strategies should be made accordingly by the companies to face
the situations
Every country has different pattern and effects of Monsoon on its
GDP, hence its very important to understand it for marketing
managers of international firms.

THANK YOU