Kolkata: IMD, or Indian Meteorological Department, has said that rainfall this year will be less than normal, raising the spectre of inflation, something
that RBI governorand analysts of SBI Research, the economy research arm of the State Bank fo India, raised earlier. Last week private weather forecaster Skymet predicted the return of El Nino effect in India this year, which is likley to drive southwest monsoon below normal this year. In fact IMD has said Southwest Monsoon is projected to be 92% of the Long Period Average. Rainfall measuring less than 96% of the LPA is classified as ‘below normal.’ Lst week, Skymet Weather announced that rains during SW monsoon could be about 94% of the long-period average. In India rainfall is of freat significance as it substantially dtermines farm output, and, in turn, food inflation. This comes as a grim prospect as the Indian economy is already experiencing inflationary pressure, which is not going to dissipate in the next few quarters due to the US-Iran war.
Super El Nino and impact on farm output
Without mincing words, a recent report of SBI Researchwarned that we should brace for a super El Nino this year. It causes warming of sea waters by more than 2 degree Celsius. There is a 62% chance of it developing between June and August, that report said.
It is quite obvious that with both Skymet and IMD predicting rainfall at 94% and 92% of the long-period averasge, the SW monsoons are going to be less than satisfactory for the economists. Lower crops and vegetable supply can build a lot of stress in the economy that is already being put to severe test by the elevated energy prices through which inflation in imported in the country.
Lower farm output weakens the rural economy, affects wages for the agricultural labourers and results in supply constraints for food items. Weak rural economy and a higher inflation rate can drive down the aggregate consumption level, which is a push to the growth factor. The demand for a wide array of items from motorcycle and tractors to FMCG products and fertilisers and textiles depend on normal rains and farm output. Agriculture still employs the biggest share of labourers in India.
Food items in inflation basket
The weightage of food and beverage items has gone down in the new 2026 Consumer Price Index series. Yet the weightage of food and beverages in India’s retail inflationis still as high as 36.75%. The earlier weightage was 45.86%. Last week, RBI governor Sanjay Malhotra warned about the possible impact of El Nino on food inflation.
Food inflation in March
In March, retail inflation in India went up to 3.40% from 3.21% in February. Food inflation rose to 3.87% in March, though the prices of onion and potato declined by a big 27.76% and 18.98% respectively. Rural inflation (3.63%) was higher than outpaced urban inflation (3.11%). Analysts pointed out that the rise in inflation footprint in March carried a small impact of the energy crisis due to the US-Iran war, from which the government is trying to shield the economy by cutting excise on petrol and diesel by Rs 10/litre.
2015: Lowest rainfall in recent years
According to data, the country witnessed reduced monsoon rainfall in 2023. That year IMD warned of “near normal” rainfall at 96% of the LPA. The worst rainfall performance in recent times was recorded in 2015, when IMD warned of rainfall at 93% of the long period average but the actual rainfall was only 86%, which marked one of the country’s worst drought years in this century.
