Weak Monsoon To Increase Food Inflation In India: Moody's

Posted By: Religare
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Global rating agency, Moody's has said that a weak monsoon is likely to be credit negative for India as it is expected to increase food inflation as well as government deficits, PTI reported.

Weak Monsoon To Increase Food Inflation In India: Moody's
According to the agency, the magnitude of the negative effect will depend on the actual spatial and temporal distribution of rainfall as well as policy measures the government adopts in preparation and in response.

Commenting on the development, an agency official said, "A weak monsoon is credit negative for India because it lowers agricultural output, increases food inflation and adds to government deficits."

"A weak monsoon would likely raise food prices, which have been rising faster in India than the global average. Because food accounts for more than 50 per cent of average household spending in India...higher food prices pinch household budgets in India to a greater degree than elsewhere, and hurt GDP...," he added.

The government is planning to counter the effects of a weak monsoon through increased monitoring of rainfall and sowing, releasing buffer grains and introducing crop insurance programs.

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