Reserve Bank of India (RBI) Governor Shaktikanta Das said that while retail inflation has been brought down to below 5%, there are still certain global and local challenges ahead. “One is international uncertainty because of the war or geopolitical tensions. The other challenge is the El Nino prediction," he said
Shaktikanta Das said, "While consumer and business outlook surveys display continued optimism, headwinds from weak external demand, volatility in global financial markets, protracted geopolitical tensions and intensity of El Nino impact, pose risks to the outlook.”
Photo: Vani Gupta/India Today
During normal conditions in the Pacific ocean, trade winds blow west along the equator, taking warm water from South America towards Asia. To replace that warm water, cold water rises from the depths. El Nino and La Nina are two opposing climate patterns that break these normal conditions
Photo: Vani Gupta/India Today
El Nino is a climate pattern that describes the unusual warming of surface waters in the eastern equatorial Pacific Ocean. According to experts, the formation of an El Nino is likely to affect the production of several key crops, and could even alter trade routes for their markets
According to the National Oceanic and Atmospheric Administration (NOAA), El Niño and La Niña can both have global impacts on weather, wildfires, ecosystems, and economies. Episodes of El Nino and La Nina typically last nine to 12 months, but can sometimes last for years. Generally, El Nino occurs more frequently than La Nina
El Nino, which is associated with warming of equatorial Pacific Ocean waters, often hampers the June-September monsoon. India’s met department has said that El Nino could emerge in the monsoon season starting from June
During El Nino, monsoon winds are weak and air sinks over India's mainland, which suppresses cloud formation and rain. If rainfall remains unevenly distributed in July, a crucial month for Kharif crops sowing, their yields may get affected
The prediction of a ‘super El Nino’ could further fuel high food inflation and slow down growth with increased weather fluctuations in the form of heatwaves and unseasonal rains. Prices of key crops such as rice, wheat and pulses are already high and a failed monsoon would push food inflation even higher
Historical data indicates that in an El Nino year, north India typically receives above-normal rain during winter months due to above-normal western disturbances. These western disturbances are low-pressure areas that originate in the Mediterranean and move eastwards, bringing rain to north India in winter
According to Nomura, the possibility of El Nino conditions is developing this year and this could possibly push food inflation temporarily higher. "India's agriculture economy is already reeling under the pressure of consecutive bad kharif and rabi seasons. A third consecutive bad agricultural season could severely impact rural incomes, force the government to announce higher Minimum Support Prices and possibly push food inflation temporarily higher," Nomura India Chief Economist Sonal Varma said in a note
“In the last 20 years, 4 out of 5 occasions have seen decline in kharif and rabi output. The soil moisture post monsoons and water reservoir levels drive winter crops and rabi output. Thus, poor monsoons can not only impact kharif but rabi output as well. Hence, El Nino has the potential to impact food inflation in the coming year which can impact rural demand,” said Ritika Chhabra- Quant Macro Strategist, Prabhudas Lilladher PMS