Low Rain Expectation Puts Indian Inflation in Focus

India’s monsoon season is expected to yield the lowest rainfall in four years, exacerbating the country’s inflation battle through higher food prices, economists say.

Earlier this week, the Indian Meteorological Department (IMD) said it expects below-normal precipitation for the June to September period at 93 percent of the long-period average.

The IMD cited the El Nino effect, which has a 70 percent chance of occurring in July or early August. El Nino is the term for a warming of the Pacific Ocean’s surface waters as a result of weaker winds.

“Monthly rainfall is likely to be 7 percent below normal during July and 4 percent below normal during August. The forecast of a poor rainfall during July is a cause of concern as food production during the summer crop season is most dependent on the July rain,” wrote economists at Nomura in a note published Tuesday.

Inflation rose to a three-month high of 8.59 percent in April. In late January the Reserve Bank of India said it aims to bring inflation to 8 percent by early 2015 and 6 percent by early 2016.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza