Monsoon in Aug-23 made a heavy dent to the season’s cumulative rainfall performance, which swung from a surplus of 5% as of end Jul-23 into a deficit of 10% as of end Aug-23.
Download ReportQuantEco Research || India Monsoon Update: Aug-23 makes a heavy dent
Standalone, a 36% deficiency in Aug-23 marked the worse outcome historically in over a century, the last such occurrence taking place in 1913 (with a much lower deficiency of 27%!). While kharif sowing has not shown any deleterious impact yet, risk of downside to crop yields cannot be dismissed. This coupled with moderation in area sown under pulses, could imply food price pressures lingering on in some of the staple household items of consumption even as tomato price correction and LPG price cut are set to offer sizeable reprieve to Sep-23 CPI inflation.
For Q2 FY24 average CPI inflation is likely to overshoot RBI’s revised estimate of 6.2% by as much as 40-50 bps. While this upside has been accounted for in our full year estimate, we maintain a close watch on the recent hardening in global crude oil prices and the possibility of El Nino strength weighing on domestic crop yields and global food production, for any further minor upside risks to our FY24 CPI projection.