Weak monsoon to be credit negative for India: Moody’s

Weak monsoon to be credit negative for India: Moody’s

FPJ BureauUpdated: Saturday, June 01, 2019, 01:14 AM IST
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New Delhi : A weak monsoon is likely to be credit negative for India as it is expected to push up food inflation as well as government deficits, global rating agency Moody’s said. The Indian Meteorological Department (IMD) has revised its monsoon forecast for 2015 from “below normal” to “deficit”.

“A weak monsoon is credit negative for India because it lowers agricultural output, increases food inflation and adds to government deficits,” said a Moody’s Investors Service report. The magnitude of the negative effect will depend on the actual spatial and temporal distribution of rainfall as well as policy measures the government adopts in preparation and in response, it added.

“Because food accounts for more than 50 per cent of average household spending in India…higher food prices pinch household budgets in India to a greater degree than elsewhere, and hurt GDP…,” the agency said.

India’s inflation touched double digits in 2012 and 2013 partly because of high food prices, but is now below the RBI’s January 2016 target of 6%, it said. Agriculture comprises about 17-18% of GDP so lower farm output could temper 2015 GDP growth in the absence of higher growth in other sectors, Moody’s said.

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