Weather, veggies and peer pressure: All that can shape RBI MPC’s rate verdict tomorrow

economictimes.indiatimes.com:

RBI) rate-setting panel which commenced its three-day bi-montly meeting on August 8, amid rising food prices. At the end of this meeting on Thursday, tomorrow, the Monetary Policy Committee (MPC) will present its decision on key policy rate hike, inflation forecast and GDP outlook. However, the focus will be on how India’s central bank is planning to cope with the rising inflation print.

India’s retail inflation witnessed an uptick of 4.81 per cent in June after hitting a 25-month low of 4.25 per cent in May on an annual basis. Here are the key factors which could shape the MPC policy decision:Weather Disruption in monsoon is a huge setback for a country which is heavily dependent on agriculture. Uneven rains have been a concern for the RBI as well.

An erratic rainfall pattern in the ongoing monsoon season has led to lower sowing of the Kharif crops. This, in turn, will act as a catalyst for inflation. Hence, the RBI may take it into consideration to keep prices in check for the upcoming months.

India’s weather department had said that the country is likely to receive below-average rainfall in August due to the El Nino weather pattern. Rainfall in India is a major source of water needed for farming and to fill reservoirs and aquifers stored for further use. Rainfall in India in June was 9 per cent below average, but in some states, the rainfall deficit was as much as 60 per cent below normal.