Despite the fact that the monsoon is still three months away, there are already worries that an El Nino influence that brings about drought-like conditions may increase food inflation. A decline in agricultural output could keep inflation high during the current fiscal year, according to several study reports.

The Pacific Ocean experiences El Nino and La Nina as climate patterns. They affect the global climate. While La Nina is advantageous for India, El Nino results in warmer winters, drier and hotter summers, and a weaker monsoon.
El Nino is expected to reappear in June–December 2023 with a high chance (55–60%), according to the US National Oceanic and Atmospheric Administration (NOAA). The Indian monsoon season, which runs from June to October, may suffer as a result. Only three of the six years in which NOAA predicted an El Nino in February actually happened, with other years’ conditions remaining neutral or even normal. However, we also observe that the chance assigned to 2023 (55–60%) is the highest in many years, according to a study report by Jefferies.
According to a research report by Emkay Global In the past 20 years, all droughts have occurred during El Nino years, “Given the already limited supply and firmly established pricing pressures, a drought this year is likely to result in severe price variations. As a result, the state’s ability to purchase grains would be further hampered. Retail prices are also anticipated to increase, which will further tighten the state’s financial situation”, the research said. Minimum support price increases will also be required to be greater in order to assure fair returns to the agricultural sector.
These reports follow the finance ministry’s monthly economic assessment, which said that “some meteorological agencies predict the return of El Nino conditions in India this year.” If these forecasts come true, there might not be enough monsoon rains, which would reduce agricultural output and raise prices.
However, in addition to the monsoon and agricultural output, there are numerous other factors that affect consumer price inflation overall. A decrease in the price of crude oil, one of the major factors, can counteract an increase in food costs. A decrease in agricultural output, however, would undoubtedly affect rural demand, according to analysts.

According to Mitul Shah, head (research – institutional desk) at Reliance Securities, “the forecast of a heat wave in March ahead of the Rabi harvest and initial forecasts of a below-normal monsoon this year due to El Nino is further adding to concerns about food inflation and fall in rural incomes.” Concerns about the economy are being ignited, according to Shah, by weakening rural demand, decreasing hiring, and lowering sales of consumer durables.