A good harvest strengthens the rural economy as farmers make more money. A poor or late harvest means weddings - an expensive affair - and key purchases are put off to next year, damaging demand. A poor crop would also drive up - already high - food prices. The longer the country waits for the cooling effect of rain the more energy is consumed due to air conditioning, potentially leading to a widening of India's power deficit.

Direct impact on stock market

In 2005, India's Centre for Mathematical Modeling and Computer Simulation revised their forecast, from April prediction of 22% above normal rain, to 34% below normal, in doing so the Sensex dropped 77 points on the news.

Concern mounts

This year, Government has been bullish, claiming in reality a delay wont make much difference to the economy. However, news that rainfall from June 1st - June 17th was 45% below normal, has led to speculation that the Prime Minister's Office is closely following the situation.

V.K. Sharma, head of research at Anagram Stockbroking believes there will be an effect if the rains stay away, "Delay in monsoon will play the spoilsport and may hit GDP by at least 1 to 1.5 percentage points."

FMCG's likely to be hit

FMCG companies sell about one-third of their total products in rural areas, a fall in rural income has an impact. Nitin Paranjape, CEO and MD of Hindustan Lever is in no doubt of the monsoons importance to his business and the country, "We are watching this space and listening to what the weatherman has to say everyday. Subject to the (behaviour of) monsoon in the next few months, we should see good growth for FMCG sector. The business depends on monsoon, and the country depends on the monsoon".

Until India upgrades agricultural infrastructure and expands irrigation systems, India's economy, its businesses and farmers will always be at the mercy of the monsoon. India is looking to the skies.