Devangshu Datta: Rainy days ahead?

BEATING THE STREET

In England, the preferred topic of choice in conversations between strangers is the weather. This is because it's non-controversial. Everybody hates English weather but it doesn't have a massive economic impact on most lives.

In India, the weather, or more precisely the monsoon, is a more controversial topic. Directly or indirectly, it affects everyone's bank-balance.

Last year, growth was propelled by a decent monsoon. If this monsoon turns out equally good, the impetus will be maintained. That is vital to the market since everyone has made optimistic 2004-05 projections.

Investors have been heartened by the prediction that the 2004 monsoon will indeed be normal. Unfortunately the issue is politically sensitive and the truth could be hidden by semantics. "Normal" has a variation of plus/minus 10 per cent and it could imply many districts suffering either drought or flood.

Monsoon data is officially classified. Following Independence, some bright sparks thought that knowledge of rainfall patterns might encourage food hoarders in years when it appeared rains would fail.

Luckily that lunatic stipulation isn't taken seriously anymore though an independent researcher would still find it surprisingly difficult to obtain complete district-by-district rainfall records over the last 150 years.

Concealing data would not make sense anyway. Weather cycles aren't worked out through applying numerological formula to past records as used to be the case. Weather-modelling has improved enormously since the First Five-Year Plan.

Sophisticated super-computers like Param are used to create and solve multi-variable weather models with the help of data gathered through infra-red satellite imagery. One of the most fascinating branches of mathematics "" "chaos theory" comes into play when analysing dynamic non-linear variables that create weather patterns.

Despite super-computers and sophisticated maths, weather predictions still remain a matter of inspired guesswork. There are many reasons why classical science has never delivered perfect weather predictions.

One is that controlled experiments are impossible "" you cannot tinker with one variable while keeping the others fixed. Non-linearity is another reason. Heat, wind speeds, cloud cover and thousands of other factors are involved and none of these move in straight lines. When you put them together, you have absolute chaos.

Another difficulty is that feedback loops develop across the entire planet. A one degree change in ocean temperature off the South American coast can result in massive changes in India's rainfall a year later. As meteorologists say: A butterfly fluttering its wings in Beijing can cause a hurricane in New York.

Some predictions can be made despite these difficulties. The same mathematics is often used to model the non-linear chaos of price movements in financial markets.

These also depend on multiple variables interacting in complex fashion with each other. Benoit Mandelbrot invented chaos theory (borrowing heavily from Lorenz and Poincare) while originally analysing cotton futures movements.

Chaos theory suggests that price movements will always contain a high degree of local unpredictability while conforming to broad patterns. That's just as true for weather and climate as well.

Let's hope that the weather boffins have got things right this year and "normal" translates into even, adequate rainfall across the entire country. Only then will the stock market impetus be maintained after a brief blip due to elections. If the monsoon is "normal" and inadequate, the market will fall.