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New Delhi: India’s unstable and below-normal monsoon rainfall could pose challenges to inflation and economic growth in rural areas in the medium term, according to Barclays Plc’s Chief India Economist.
Rahul Bajoria said in a Bloomberg television interview with Juliette Sally and Rishad Salamat on Monday that the country is facing an 8% monsoon rainfall deficit, which will affect future sowing and harvesting seasons, putting pressure on consumer prices and agriculture. will squeeze the area.
“I think it’s a little medium-term impact that kicks in, where the government will have to look at steps for rural incomes, which depend to a large extent on agricultural activity,” Bajoria said.
Inflation broke out before slipping above the Reserve Bank of India’s 2%-6% target range in May and June, while the central bank has maintained its bottom-line stance on the economy’s recovery from the pandemic. Provisionally looking at the current surge in inflation, the central bank sees inflation at 5.7% from the fiscal year to March 2022.
According to Bajoria, the government may have to step up relief measures such as rations and cash transfers, to mitigate the impact of the lack of rain.
“They may also have to think from a geographical point of view, which crops are getting affected more and taking mitigating measures to control inflation,” Bajoria said. For example, a low cotton harvest may lead to a rise in clothing inflation.
Bajoria also said that the RBI is slowly moving towards normalisation, which will require a “safe growth approach”, he said.
The RBI in its policy stance is focusing on increasing inflation, but this is not enough to trigger normalisation.
“The priority will still be to see whether the uncertainty surrounding the growth forecast has ended as inflation has risen over the past year and a half,” he said.bloomberg
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