A weak monsoon is emerging as India’s next inflation risk, with a developing El Niño threatening to curb rainfall and push up food prices just as an easing oil relieves broader price pressures. The southwest monsoon, which accounts for about 70% of India’s annual rainfall, is vital for the $300 billion farm economy and has an outsized influence on food prices, rural demand and broader economic output.
“Bad rains bring bad sentiment, both in equity markets and rural spending,” said Rajni Thakur, an economist at L&T Finance, which runs a rural loan book of over `450 billion. “First comes inflation, then sentiment is hit, which leads to a cut in spending during the festive season.”
