Above-average monsoon rainfall in India expected to bring respite to farmers

Amid drought, hope rests with the monsoon.

After two consecutive years of poor rainfall, which have nurtured the drought in parts of India and diminished farmers’ incomes, the early forecast is that this year’s rains could bring relief.

On Tuesday, the India Meteorological Department (IMD) made its first forecast for the season. It predicted an above-average amount of rain.

According to the IMD, this year’s monsoon rainfall is likely to be 106 per cent of the 89 centimetre average for 1951 through 2000.

Monsoon season starts in June and lasts until September.

The IMD’s model forecasts “El Niño conditions to weaken to moderate-to-weak levels during the first half of the monsoon season”, which should drive rainfall.

It has said that the drought-hit Marathwada region in Maharashtra is expected to receive good rainfall, along with most regions.

Analysts said that the impact of good monsoon rainfall in India this year would be significant.

“If the forecast pans out, this will provide much-needed relief to the rural, agriculture sector in terms of agri output. It also augurs well for the inflation outlook,” wrote Edelweiss, a financial services company based in Mumbai.

Poor rainfall leads to a reduction in crops, which results in price rises.

“While a detailed forecast of regional and monthly distribution of rainfall will be issued in June 2016, the IMD indicated that rainfall will be well-distributed across regions including central India, which is highly monsoon-dependent.,” Edelweiss said. “The northeast region, however, may receive below-normal rainfall.”

Analysts at Crisil, a research house that is based in Mumbai and is part of Standard & Poor’s, said that that “assuming a normal monsoon, an uptick in the rural economy will drive consumption” in the financial year to the end of March.

It added that a normal monsoon would result in inflation averaging at about 5 per cent, which it said was “corroborated by the IMD’s rainfall forecast for the 2016 southwest monsoon”.

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Europe’s rearming plan

Suspend strict budget rules to allow member countries to step up defence spending
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Use the existing EU budget to direct more funds towards defence-related investment
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”