What will the rising mercury this year mean for inflation in India?
India’s balance of food-supply likelihoods has raised the question of whether fiscal 2024-25 will see monetary easing at all
is executive director and senior economist at DBS Bank.
Temperatures continue to hit new highs every subsequent year. In its March 2024 update, the World Meteorological Organisation’s (WMO) annual report confirmed that 2023 was the warmest year on record, with the global average near-surface temperature at 1.45° Celsius above the pre-industrial baseline. Add to this, it was the warmest 10-year period on record. The agency added that the 2023-24 El Niño had peaked, but was still one of the five strongest on record. While the weather pattern was gradually weakening, it will continue to impact global climate, with above-normal temperatures predicted over almost all land areas between March and May this year.
The India Meteorological Department recently predicted that above-normal temperatures are likely to prevail over most parts of the country during the 2024 hot weather season (April to June), except some parts of east, northeast and northwest India. In official parlance, a heatwave is recorded if the maximum temperature of a station reaches at least 40° Celsius for plains and 30° Celsius or more for hilly regions. A departure from normal in the range of 4.5-6.4° Celsius is viewed as a heatwave, while anything more than 6.4° Celsius above the norm is termed a ‘severe’ state.
Bolster defences: Indian authorities have taken proactive measures to mitigate the impact of heat. For instance, power ministry officials have held reviews on ensuring uninterrupted power availability in cooperation with counterparts like India’s coal and railway departments. Coal stocks have also been built up to meet peak demand, which is likely to be higher this year than experienced in past summer months. The ministry has projected 260GW peak power demand in the second quarter of 2024, higher than the record set by the third quarter of 2023. Despite greater installed capacity for renewable energy, the country’s base load is still fossil-fuel heavy.
Concurrently, a two-decade long emergency provision has also been invoked that will require idle gas-fired power stations (left unused due to commercial concerns) to operate through May and June to meet an increase in electricity demand and prevent shortages akin to 2022. Earlier, an emergency rule for coal imports was invoked; it was supposed to be in force till June, but will now run through the end of the third quarter. Lastly, regular maintenance of power plants will be deferred to the monsoon period and new capacity additions will be fast-tracked. The general elections underway will span May, with results due on 4 June.
Economic impact: The economic impact of heat is likely to be the most telling on perishable crops— especially vegetables beyond the T(omato) O(nion) P(otato) three—and food-led inflation, aggravating the seasonal increase in prices during summer,