Rising El Nino Chances May Weigh on India's Macro Stability: BofA

Indian economy, which is heavily dependent on its agriculture sector may face challenges this year due to a rising probability of El Nino, which corresponds to lesser rainfall in the region, according the latest research report from BofA.

"The chance of an El Nino developing in the coming season has increased. When 3 out of 4 conditions are met, an El Nino event has developed around 70% of the time. Given India's dependence on monsoon rainfall, a probable El Nino event is seen as a key risk to macro stability," said Aastha Gudwani, India economist at BofA.

El Nino is a climate phenomenon that refers to the periodic warming of sea surface temperatures in the central and eastern equatorial Pacific Ocean. This phenomenon has widespread effects on global weather patterns, leading to disruptions in weather and climate around the world. One of the regions significantly impacted by El Nino events is India.

The combination of drought, crop failures, and water shortages caused by El Nino can have negative economic consequences, particularly for rural communities that heavily depend on agriculture.

"The Government has been intervening to stabilize (crop) prices by using buffer stocks and other administrative measures. That said, a supply shock at a time like this, could further accentuate the price problem," BofA's Gudwani added.

While North-west and central India have seen above normal or near normal rainfall so far, the southern peninsula & East and north-east India have seen deficient rains. State wise data shows- Uttar Pradesh, Bihar, Jharkhand, Tripura, Manipur, Mizoram and Kerela witnessing deficient rains. In terms of districts, 20% of sub-divisions have seen deficient rains in the monsoon season so far, 68% received normal rainfall and 12% has seen excess to large excess rains.