The Week That Was:

From: Vartaa Editorial Team on Jul 4, 2016

Rains return to torment Uttarakhand

The state of Uttarakhand was at the receiving end of nature's fury once more as a cloudburst claimed 22 lives in the Chamoli district. The memories of the 2013 disaster that wiped away many towns and villages and caused sever damage to many historical sites is still fresh in the minds of people of the state. The National Disaster Relief Force, the State Government and the Central Government all swung into action to contain the damage.

With an eye on UP

Political parties are jostling to have their pieces in the right order on the chessboard of UP politics. The state, which goes to the polls next year in February, is seeing a tense fight between the Samajwadi Party, the BJP and the BSP of Mayawati seeking to make a comeback. The Samajwadi Party is battling internal feuds, particularly within their own first family. The BJP is also looking to stir the pot and has asked the Law Commission to examine the feasibility of a national Uniform Civil Code, a measure that is opposed by the SP and the BSP and tends to lead to sharp debates on communal lines.

Auditing the regulator

In a surprise move, the CAG has requested that it may be allowed to audit the books of the RBI. The RBI and other financial regulators fall outside the purview of the CAG and their auditors are appointed by the government. The CAG, Shashi Kant Sharma, has cited the rise in financial frauds as a reason to ask for better governance and checks over financial regulators.

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  • July 2016 marks 25 years of the original economic reforms that began with the budget of July 1991. Read on here to get a sense of their significance

Chart of the Week

Monsoon has finally covered the entire nation and the country has breathed a collective sigh of relief. Say what you want about India's economy becoming more sophisticated, diversified, and service-based of late, the uncomfortable fact still remains- India's GDP still heavily depends on Agriculture both because of the size of this sector and the sheer number of people it supports. In fact, Agriculture is almost 17% of the total economy and employs almost half the population.

So how important is this vital, life-giving precipitation for the GDP growth rate? We decided to examine it in this week's chart. Notice how the peaks and valleys of the rainfall curve move almost in sync with the peaks and valleys of the GDP growth rate curve. This suggests a strong correlation. In fact when we used the data for the last 50 years, we found a very high correlation of 0.48. A correlation of 1 suggests perfect movement of one metric with the other. This should not be too surprising. When we look at just the last 25 years however, the correlation drops to 0.13. This is still fairly high- you can see the peaks and valleys move more or less in sync even for recent years.

As the economy diversifies further and more rural agricultural workers move to urban centers to work in other industries, this correlation will further decrease. However, without a superior irrigation network and the adoption of best practices for water conservation, the country will still pay the price for a poor monsoon through higher inflation and the tremendous hardship faced by households forced to scrounge for water.