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Resource centre on India's rural distress
 
 

Poor monsoon does not always translate to high inflation

-Moneycontrol.com

Here is a counterintuitive set of data, which indicates a decoupling of rains and inflation

With the monsoon delayed in June and being unevenly distributed in July, everyone has been worrying about a fall in food production and resultant inflation. After all, we keep hearing that India’s agriculture is mostly rainfed.

Then, the reasoning goes like this–poor rains equals poor harvest equals high inflation. 

But does poor rains really cause inflation?

Here is a chart from Nomura that challenges that. With data–from FY13 through FY22–it shows the correlation between monsoon’s deviation from the normal and inflation levels. As you can see, below normal monsoon does not equal high inflation and above normal monsoon does not equal low inflation. 

Please click here to read more.