Finance Minister Nirmala Sitharaman on Sunday flagged El Niño-driven weather disruptions and emerging water shortages as fresh domestic risks to inflation, saying price pressures this year cannot be attributed solely to global geopolitical tensions.
Speaking to Rahul Kanwal, CEO and Editor-in-Chief of NDTV, at the NDTV Profit Business Leadership Awards, Sitharaman said India faces a dual challenge of imported inflation from the conflict in West Asia and weather-induced supply-side pressures at home.
"Normally I would have said inflation is getting imported because of uncertainties in the Middle East... But also this year there is an El Niño factor," Sitharaman said.
She noted that rainfall has been uneven across the country, with some regions receiving excessive showers while others remain deficient.
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"The rains are happening excessively in some parts, scarcely in some others... The catchment areas are not receiving adequate rain. So water for irrigation, drinking, and crops; all of them are also going to pose a bit of a challenge," she said.
According to the finance minister, these conditions mean inflation this year is likely to be influenced as much by domestic weather conditions as by external shocks.
"Inflation, therefore, cannot be just imported. Our own want of rain and the monsoon being less than normal can also add to inflation," she added.
Despite the uncertain global backdrop, Sitharaman said she does not see an immediate need to revisit the Union Budget's fiscal assumptions.
The government, she said, has already created financial buffers to absorb potential shocks, including higher crude oil prices, rising shipping insurance costs and increased fertiliser import bills.
"We've made provisions... there are resources kept aside for it," she said, adding that subsidies for fertilisers and support for essential imports remain adequately funded.
"As of now, I don't think I'll look at my budget numbers for re-adjusting."
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Reflecting on the recent nationwide student protests over examination issues, Sitharaman said youth movements are a natural feature of every generation and governments must remain responsive to public sentiment.
"Every generation, when young, joins protests... that's the spirit of the young," she said.
She maintained that the government did not obstruct demonstrations and instead focused on resolving the issue by conducting re-examinations quickly to ensure students did not lose an academic year.
"We have to keep our ears closer to the ground so that we hear what's going on, understand what's going on in time," Sitharaman said.
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