El Nino may impact India's FY 2015 GDP, inflation: Reports

An El Nino induced below normal monsoon this year could have a bearing on economic growth in FY 2015 and inflation, according to reports.

An HSBC report said inflation may remain sticky in the current financial year as a possible El Nino effect on the monsoon is likely to push up food prices and geopolitical uncertainties are likely to pump up global commodity rates.

A Bank of America Merrill Lynch (BofA-ML) report said an El Nino-induced drought poses a 50-75 basis points risk to India's FY 2015 growth forecast of 5.4 per cent and could result in a spike in inflation levels to around 8-10 per cent.

BofA-ML said if rains are normal, CPI inflation should come off to 7-7.5 per cent by March 2015 and if the El Nino impacts the kharif harvest, rising food prices would push up CPI inflation to 8-10 per cent.

The RBI may eventually respond by tightening policy rates further to contain upside risks to prices and to bring inflation to 6 per cent or below by early 2016 if it sticks to the Patel Committee's recommended glide path, HSBC said.

The RBI's target is to ease retail inflation, as measured by the Consumer Price Index, to 8 per cent by January 2015 and 6 per cent by January 2016.

Both retail and wholesale price inflation accelerated in March due to rising food prices. While wholesale inflation rose to a three-month high of 5.7 per cent, retail inflation inched up to 8.31 per cent, after softening for three straight months since December.

The RBI had increased the key policy repo rate three times since Raghuram Rajan took over as Governor in September to contain inflation.

India is expected to see below normal monsoon this year with Met department forecasting 95 per cent rainfall after a good spell of four years.

India Meteorological Department (IMD) officials said the monsoon is expected to be below normal because of the El-Nino effect, which is generally associated with the warming of ocean water.

El Nino refers to the warmer-than-average sea surface temperature in the central and eastern tropical Pacific Ocean. This condition occurs every 4-12 years and had last impacted India's monsoon in 2009, leading to the worst drought in almost four decades.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • Sanskrit does not compare with German in the job market

    While there can be no argument that the importance of Sanskrit as an all-India language needs to be emphasised, particularly for the young generation

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

M S Swaminathan

Public good research in agriculture

Public good research in agriculture is designed to promote risk ...

Purnendu Ghosh

Why we must know the rules of the game

We like to believe that people are good and we ...

Shona Adhikari

Pop art is truly a feast for the eyes

The internationally reknowned Bruno Art Group’s presence in India had ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture