El Niño comes with economic risks

Why in the News?

The month of August has been registered as the driest ever month which shall be aggravated by strengthening of El Niño which shall pose a serious food inflation challenge.

El Niño effect:

1. The phenomenon is marked by abnormal warming of the central and eastern equatorial Pacific Ocean waters towards Ecuador and Peru.

2. This shall lead to suppressed rainfall in India.
3. The August month has witnessed 30.7% below-normal rainfall after receiving 4.2% surplus during the first 2 months of the southwest monsoon season (June-September).
4. The Oceanic Niño Index (ONI) which measures the average sea surface temperature deviation from the normal in the east-central equatorial Pacific region touched 1 degree Celsius, twice the El Niño threshold of 0.5 degrees.
5. The US National Oceanic and Atmospheric Administration has predicted ONI to exceed 1.5 degrees Celsius in the coming months and strengthen through the 2023-24 winter.

Impact on Crops:

1. The South-west monsoon with adequate rainfall is crucial for
   1. kharif season crops, mostly sown in June-July and harvested over September-October. 
   2. fill up dam reservoirs
   3. recharge groundwater tables
   4. provide water for the crops cultivated during the rabi (winter-spring) season.
2. The water levels in 146 major reservoirs have been 21.4% lower than a year ago and 6.1% below the last 10 years average in this month.

3. The dry weather in August can affect yields of the already-planted Kharif crops which are now in vegetative growth stage. 
4. The upcoming rabi season crops which are largely dependent on water in the underground aquifers and reservoirs will be affected due to the strengthening of El Nino.

Economic risks involved:

1. In 2022, when public wheat stocks fell to their lowest its effect on inflation was offset by sufficient availability of rice.
2. But currently, there is pressure on both rice and wheat stocks, besides El Niño whose effects are still unfolding.
3. The rice and wheat stocks in government warehouses stands at 65.5 million tonnes (mt) currently, a six-year-low and retail food inflation in July stands at 11.5% year-on-year.
4. El Niño effects can increase the worry if inflation becomes persistent and broad-based.

Improving the domestic availability and prevention of hoarding and unscrupulous speculation is necessary to off-set the economic risks associated with possible strengthening of El Niño.