India: Weather-driven inflation risks – Standard Chartered

Standard Chartered Bank economist Saurav Anand highlights rising inflation risks for India as deficient monsoon rains and persistent El Niño threaten food output. The report notes sowing is down and reservoir levels are low, with pulses, vegetables, sugar and oilseeds most exposed. The authors see upside risks to FY27 CPI inflation and potential repo rate hikes if food prices surge.

Monsoon deficit threatens food prices

"With El Niño conditions persisting and the likelihood of drier weather conditions after mid-August, the risk of a large rainfall deficit by the end of the monsoon season, and a consequent spillover to the current summer and upcoming winter crops, remains high."

"A double-digit rainfall deficit would significantly raise the upside risk to inflation."

"Lower weight of food in the CPI basket, better irrigation coverage, potential policy intervention could partially cap the inflationary impact."

"Despite better irrigation coverage and likely policy intervention, the impact of a large monsoon deficit/El Niño on crop output and prices is unlikely to be completely offset."