Daily News - Back

Rainfall and Crude Oil Prices

Prelims – Economy, Mains -GS3- Economic Development

The surplus monsoon and low crude oil prices could take the economy back to a high growth path.

Why are crude prices low?

1. Crude oil prices have remained low despite the efforts of certain OPEC countries to increase the price.

2. This is due to

a) The weakening growth forecast for most economies of the world and

b) Global shift in automobiles from fossil fuel-based power towards renewables like electric, solar and wind.

3. The US, which used to be a net crude importer is now a net exporter.

What is the progress of the monsoon?

1. Monsoon rainfall started from a deficit of 35% at the end of June. Now rains across India are 3% above normal.

2. But, it has led to floods in agriculturally important states like Punjab, Maharashtra, Tamil Nadu, Kerala and Andhra Pradesh. This could affect the sowing of crops.

3. The spatial and temporal distribution has remained uneven, with states such as Haryana, Uttar Pradesh, Bihar, Jharkhand and West Bengal facing deficient rainfall.

How could the two benefit the economy?

1. A healthy monsoon will lead to good crop production, benefiting farmers. This directly helps consumer companies and other industries.

2. Similarly, low crude oil prices will save the country foreign exchange and help farmers and companies control their energy spend.

Which are the other issues impacting the economy?

1. Lack of private investments over the past few years, subdued demand and trade tensions and large imports of electronics from China are hurting the Indian economy.

2. Government spending on unproductive social welfare schemes continues to be high.

3. India’s banking and NBFC sector is still reeling under high NPAs.

4. Government reversed some of its unpopular tax measures, but market sentiment has not revived.

5. Important sectors like auto and energy are undergoing structural changes, hurting jobs and growth.

Source: Live Mint