India's growth faces a three-pronged threat: below-normal monsoon expectations, rising temperatures due to El Niño's and higher input costs due to the West Asia conflict, according to Sakshi Gupta, Principal Economist at HDFC Bank.
Speaking to NDTV Profit on Tuesday, Gupta said weaker rainfall could hurt agricultural output, while heatwaves may push up food prices and geopolitical tensions could raise fuel, fertilizer and freight costs.
"The three things we are looking at very closely are the below-normal monsoon forecast, heatwaves and the rise in input costs because of geopolitical tensions," she stated.
According to Gupta, every 1% deviation in rainfall from the long-period average tends to reduce agricultural output by around 0.4 percentage points on average.
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The severity of the damage, however, will depend on the timing of rainfall shortages. If below-normal rainfall occurs during June and July, when a majority of kharif sowing takes place, the impact on agricultural production could be more severe. On the other hand, a rainfall deficit later in the season may have a relatively milder effect.
She noted that while rice is relatively protected due to higher irrigation coverage, pulses, oilseeds and coarse cereals remain vulnerable to a weak monsoon.
Gupta also flagged heatwaves as an emerging inflation risk, particularly for vegetables such as tomatoes, onions and potatoes, as well as milk. Tomato prices have already started rising on a month-on-month basis, she said.
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While she does not expect any policy action from the RBI this week, Gupta said inflation could average around 5.1% in FY27, higher than the central bank's current estimate of 4.6%, while growth forecasts could face a modest downgrade.
The economist expects India's gross value added growth to remain in the 6-6.5% range in the first half of the fiscal year as higher input costs squeeze corporate margins.
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