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India’s consumption, GDP growth to get boost from ‘La Nina’

The probability is improving for a La Nina event leading to a good monsoon in India which could provide a major boost to consumption, investment and GDP growth, says a Deutsche Bank report.

GDP growth-AV

According to the global financial services firm, this year could throw up positive surprises for the country.

“In order to alleviate rural distress, India needs bountiful rainfall, with proper spatial and temporal distribution. Consequently, a La Nina event could provide a major boost to consumption, investment and GDP growth,” Deutsche Bank said in a research note.

According to the report, an analysis of over 30 year data indicates strong positive correlation between La Nina and India’s key macro/rural indicators.

As per the analysis, average annual rainfall in La Nina years has been 5.3 percent above long term average and rural economy also posted strong growth during these years.

“Agri GDP in La Nina years grew at an average 7.8 percent y-o-y as against an average of 2.3 percent y-o-y in non La Nina years,” the report says.

The report further noted that the positive impact of La Nina is amplified further if it is preceded by an El Nino year, a situation similar to the current year.

On its impact on GDP numbers the report said the broader economic indicators like – GDP, private consumption and investments growth also exhibit similar trends in La Nina years, averaging 8.9 percent/7.4 percent/10.4 percent y-o-y growth – significantly higher than average growth of 5.8 percent/5.2 percent/7.2 percent respectively in non La Nina years.

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