If the rainy season is particularly good, and the harvest is strong, then plentiful food production will lead to a surplus in produce. This surplus acts as a buffer against food inflation (the largest component in Indian inflation measurement), and also enables an increase in exports. The equity markets reap benefits from a boost in earnings of companies which have direct impact from agriculture such as trucks, tractors, farming equipment, seeds, fertilizers and so on, along with other consumer goods businesses. The vibrant rural economy expansion has been a boon for companies such as electronics, white goods and car manufacturers. India is also a major exporter of cotton, sugar, soya beans and fish, and the economic impact is easily seen.
The monsoon season also has a measurable effect on gold prices. India has a voracious appetite for gold – it is not only the world’s top gold consumer but also, somewhat astonishingly, Indian households hold roughly 11% of the world’s gold. Such is the level of consumption that consumer attitude towards gold in India has the power to send global prices up or down. Given the fact that almost 60% of the demand for gold in India comes from rural areas, and the fact that rural areas benefit most from an abundance of rainfall, it becomes obvious that the monsoon season – which puts money in the pockets of the most sizeable gold-purchasing demographic in the world – drives up demand and therefore drives up prices for gold: the more money one has, the more likely one is to spend that money on gold.
Each market has its own nuances and its own list of prerequisite, insider knowledge that one can benefit from. India is a complex country with a complex economy – but it is one that can be deciphered and where profit can be made.
