Thursday, June 26, 2014

El Niño - Spoiler Alert!

It goes without saying that Indian growth story is strongly dependent on rainfall. Any shortfall, and we all scramble for places to hide from resulting high prices of agri commodities.

To make matters worse, a recent forecast that El Niño weather phenomenon, has a 90% chance of striking this year, can cause trouble for India. Rise in prices due to drought conditions (deficient water supply, lower crop output) in many areas led to riots in several countries in 2007.

As you can see in the graphic below, that India will suffer a dry spell with weaker monsoon rains but US will get a relief from drought in the west.

Click image to enlarge

The latest prediction is from European Centre for Medium-range Weather Forecasts, which is one of the most reliable of prediction centres around the world.

They have clarified that the amount of warm water in the Pacific is perhaps the biggest since the 1997-98 event which led to hottest year on record at that time.

The picture will become clearer in a month or two whether this year’s El Niño will be a small or a major event.

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