International climate researchers are predicting enhanced possibility of an El Niño in 2014. The condition, which occurs at irregular intervals of 2-7 years, weakens the Asian monsoon, often causing drought in north-west and central India and heavy rainfall (or even floods) in the North-east.
In its fight against weak growth and high inflation, the last thing that India’s economy needs is monsoon failure, which could drive up food inflation as well as weaken GDP growth.
Here are 4 scenarios:
1. There is a fair degree of uncertainty associated with these early forecasts, so it will be too premature to conclude that an El Niño will occur in 2014.
2. The occurrence of an El Niño does not necessarily imply monsoon failure in India.
3. If however, the monsoon were to get adversely affected this year, India’s economy could grow by 5.2% in 2014-15 – much lower than our current forecast of 6%.
4. CPI inflation, with nearly 50% weight of agriculture-related articles, will rise above the current forecast of 8% in 2014-15.