‘The elephant in India is the monsoon’: MPC's Dr Michael Patra on current spike in India's headline inflation

livemint.com:

RBI) released the minutes of its latest Monetary Policy Committee (MPC) meeting, in which the central bank's Deputy Governor Dr Michael Debabrata Patra highlighted that India faces the onslaught of overlapping localised supply shocks, which are causing price-sensitive food items in the consumer price index (CPI) to spike and push up headline inflation. ‘’The elephant in India is the monsoon, with August shortfalls rendering the outlook uncertain in the shadow of El Niño effects even as Indian Ocean dipole conditions are turning positive,'' said the MPC member in the latest MPC minutes released on Thursday.

The uneven progress of the monsoon manifesting in the form of excess rains in the north west regions and disrupting supply, and deficient rains in the eastern part delaying crop sowing, according to the MPC members. The RBI at its last bi-monthly MPC meeting on August 10 decided to keep the benchmark interest rate (repo rate) unchanged at 6.5 per cent citing inflationary concerns.

All six members including M D Patra, Shashanka Bhide, Ashima Goyal, Jayanth R Varma and Rajiv Ranjan voted for status quo on the policy rate. The minutes of the meeting highlighted that India's headline inflation is likely to witness a spike in the near months on account of supply disruptions due to adverse weather conditions.

There are risks from the impact of the skewed south-west monsoon so far, a possible El Niño event and upward pressures on global food prices due to geopolitical hostilities, according to the rate-setting panel. Going forward, the spike in vegetable prices, led by tomatoes, would exert sizeable upside pressures on the near-term headline inflation trajectory.