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Last updated: 24 Oct, 2023  

India.Growth.9.Thmb.jpg El Nino concerns

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IANS | 24 Oct, 2023

Stock markets are one of the key leading indicators – though not the most critical one – of an economy, and though yesterday’s market turmoil was due to an interplay of several factors, including a mixed earning season so far and fear of regional conflict in the West Asia and US Fed rate hikes for an extended period, it seems some challenging times are ahead for the Indian economy, particularly with the El Nino fears recently rearing its head again.

According to a recent report by the United Nations, the El Nino weather phenomenon is likely to persist through the first half of 2024, leading to extreme weather conditions around the world – including likely poor rainfall in India -- and negative impact on the global economy. This year, India has escaped the adverse El Nino consequences to a great extent with the monsoon season ending with more than 94 percent of rainfall.

Experts point out that disruptions in weather pattern may have implications on several industries and sectors of our economy. It is already evident how the agriculture sector was hit by erratic rainfall pattern this year, leading to sharp rises of tomatoes, onions and some other vegetables. Also, it resulted in reduction in the sown area and erosion in farmers' incomes, leading to lower rural consumption and rise in overall inflation as well.

Meanwhile, for quite some time now our exports sector has been seeing a sequential fall nearly every month due to global headwinds, with value of merchandise shipments falling 8.7 percent y-o-y for the first half of 2023-24. Now, the El Nino impact may further impact the sector, with demand falling in key markets like the USA and Europe. So, it seems it is the right time for further care to be taken for the economy. The government should keep a close watch on the evolving scenario.

I invite your opinions.

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