Financial analysts are warning that El Niño-driven weather patterns could threaten India's economic growth through fiscal year 2027.
These climate risks are critical because unpredictable rainfall and rising temperatures directly impact agricultural output, which can trigger food inflation and slow the broader national economy.
Pranjul Bhandari of HSBC said that growth risks from El Niño remain a primary concern. Bhandari said that higher temperatures are a bigger concern than rainfall and suggested that growth moderation could be visible by December [1].
Despite these warnings, Nomura has maintained its GDP growth forecast for FY27 at 6.6% [1]. This stability comes despite a significant monsoon rainfall deficit of 42% recorded in June [1]. Other estimates suggest a slightly lower trajectory, with Dolat Capital projecting GDP growth could slow to 6.5% in FY27 [2].
Inflation remains a key focal point for economists tracking the weather patterns. Sonal Varma of Nomura said that food inflation for FY27 may touch 6% [1]. Varma said she does not see rate hikes from the Reserve Bank of India in response to these pressures [1].
The current El Niño event is expected to reduce overall rainfall and increase temperatures across the region [3]. These conditions threaten to disrupt crop yields, which typically drives up the cost of staples, and impacts the purchasing power of consumers.
While Nomura remains optimistic about the 6.6% growth target [1], the disparity between that figure and the 6.5% estimate from Dolat Capital [2] highlights the uncertainty surrounding the agricultural sector's resilience.
“Higher temperatures a bigger concern than rainfall”
The tension between Nomura's steady forecast and HSBC's warnings reflects a broader debate on India's economic decoupling from climate shocks. If high temperatures lead to significant crop failure, the resulting food inflation could force the Reserve Bank of India to reconsider its stance on interest rates, potentially stalling the growth targets set for FY27.
