 "El Nino effect")
Experts said that an intense El Nino that severely disrupts the monsoon could push inflation up by 15-20 basis points by increasing food prices.
A deficient monsoon could push food inflation by 50-60 basis points (one basis point is one-hundredth of a percent).
Food items have 39.06 per cent weight in India’s consumer price index (CPI), according to a report in The Economic Times (ET).
Abhishek Upadhyay, senior economist, ICICI Securities PD, said, "It will have a lower than 50 bps (0.5 percentage points) impact on headline inflation that the Reserve Bank of India (RBI) talks about as a potential negative impact from adverse weather."
The RBI expects inflation to ease to 5.1 per cent in FY24. A less than 50 bps impact implies that the consumer inflation would remain within the RBI’s two per cent to six per cent target range, even if poor monsoon prevails this year, according to the ET report.
Yuvika Singhal, economist at QuantEco, an independent economics research firm, said that the government will be ready to step in if prices rise.
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"While a stronger intensity of El Nino could impact sowing and production, it would also mean that the government could step in with administrative measures to reign in prices, if need be,” Singhal said.
Experts said that the upcoming elections may also be a factor for the government to keep prices in control.
The Centre imposed a stock limit on wheat till the end of FY24 on June 12, following restrictions on pulses such as tur and urad to check retail prices.
Paras Jasrai, senior analyst, India Ratings and Research, said, "The government won’t be comfortable letting inflation of pulses go beyond 7 per cent to 8 per cent in an election year."
General elections are due in 2024, and five states will go to the polls by the end of 2023.
