With the El Nino looking more or less certain, the central bank analysts fear the weather impact may upset the Southwest monsoons, posing headwinds for growth and inflation outlook, according to the Reserve Bank Bulletin for June.
An adverse southwest monsoon could weigh on growth and inflation outlook even as the economy remains resilient amid a fragile global environment, said an article in bulletin published on Monday.
Geopolitical tension and trade disruptions have persisted despite the recent interim peace deal in West Asia, said the article. Global economic landscape remains fragile despite some respite gained through the interim US-Iran peace agreement, the article added.
“Any breakdown of the agreement may reignite material risks in terms of inflationary expectations, disrupted critical energy infrastructure, delayed investment spending, food security concerns, adverse financial stability outlook and structurally lower growth,” the article notes.
Amid the challenging global environment, the economy grew at 7.8% in Q4 of FY26, supported by private consumption and fixed investment. High-frequency indicators during the first two months of FY27 suggest sustained economic momentum, it added. Despite a pick-up in May, the consumer price index remained anchored and the external sector remains resilient, supported by FDI inflows and adequate foreign exchange reserves.
“The economy entered this turbulence with much better fundamentals relative to many other countries to sustain the shock,” it said.