Heatwaves, weak monsoon and oil surge may push India's inflation higher
India's inflation is expected to exceed 5% in the fiscal year starting April 1, driven by heatwaves, weak monsoon, and rising oil prices. The Reserve Bank of India had projected inflation at 4.6%, but economists predict it will be higher due to adverse weather conditions.
India is facing inflation threats from heatwaves and below-normal rainfall, creating economic pressures for policymakers. Temperatures have reached 47 degrees Celsius in northern India, and power demand has surged to a record. The government predicts below-normal rains during the June-September monsoon season, crucial for farming. Economists expect inflation to exceed 5% in the fiscal year starting April 1, above the RBI's projection of 4.6%. Food prices, which account for 37% of the consumer price index, are expected to rise due to poor harvests and high energy costs. The RBI is projected to stay on hold for longer, but a poor monsoon season could increase the chances of a pivot to tightening. India's economy is expected to expand 6.9% this fiscal year, but high food and energy costs will complicate monetary policy.
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