India may have just received a big near-term macroeconomic breather from the US–Iran peace deal. The prospect of the Strait of Hormuz reopening has cooled global oil prices, eased pressure on the rupee and reduced immediate inflation risks. But even as one external shock fades, another is already forming at home. Early monsoon weakness (28% deficient so far) combined with the likelihood of moderate to strong El Niño conditions is emerging as the next major test for India’s growth and price stability story. India is shifting from imported energy stress to a domestic climate risk even though it is better prepared now to tackle it.
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