'Inflation, subsidy bill to go up if monsoon fails to gain pace'

NEW DELHI: If rainfalls do not gain momentum, it will raise inflation level and also the subsidy bill, according to an HSBC report. It will also limit the room for RBI rate cuts.

HSBC Chief Economist for India and ASEAN Leif Lybecker Eskesen said, “If rainfalls during the entire season fall significantly below normal there will be an impact on supplies and prices despite the steps the government can take to manage the situation.”

As per the prediction of the Indian Meteorological Department, rainfall has been deficient by 25% for India as a whole until July 8, with 22 out of 36 regions witnessing below-normal rainfalls.

Reports suggest that north-west India has been the worst impacted with rainfalls deficient by 43%. Central India and the southern peninsula have been trailing by nearly 30%.

The Agriculture Department has said that due to the deficient rainfall, the production of rice, coarse cereals, oilseeds and cotton are reeling under pressure. The Central Water Commission has said that water levels in 84 reservoirs used for storage are below normal.