The EL Nino phenomenon has been in the news lately. Here is a presentation that will explain what ‘El Nino is and its impact on the Indian economy’. Do send us your valuable feedback at professor@tataamc.com

1. IMPACT OF EL NINO ON THE INDIAN ECONOMY

2. The EL Nino effect has been in the news
recently with the India Meteorological
Department (IMD) forecasting a 60
percent probability of El Nino this year
along with a below-normal monsoon
projection.
IMPACT OF EL NINO ON THE INDIAN ECONOMY

3. So, what is El Nino?

4. El Nino, which means ‘little boy’ in
Spanish, is a weather phenomenon
characterized by unusually warm
ocean surface temperatures in the
central and eastern tropical Pacific.
IMPACT OF EL NINO ON THE INDIAN ECONOMY

5. IMPACT OF EL NINO ON THE INDIAN ECONOMY
El Nino largely causes a drought-like situation and even excessive rains.
This phenomenon which emerges after a gap of 3 to 7 years has a
significant impact on climate in many parts of the world and has a
warming influence on global temperatures.
A strong El Nino can cause severe drought in Australia, Southeast Asia
and India while drenching other regions such as the US midwest
and Brazil.

6. Why is it in the news?
IMPACT OF EL NINO ON THE INDIAN ECONOMY

7. IMPACT OF EL NINO ON THE INDIAN ECONOMY
The El Nino phenomenon dramatically affects the weather in many parts
of the world. A strong El Nino can cause drought-like conditions.
Agriculture in India depends heavily on rainfall. A poor monsoon could
lower the production of crops, thereby impacting inflation and GDP
growth.
Agriculture is nearly 18 percent of India’s GDP. A lower agricultural
output would eventually mean lower rural disposable income.

8. Why is the Reserve Bank of
India (RBI) worried?

9. The RBI may have a tough task ahead as an EL Nino effect can trigger inflation
resulting in further rate hikes. This could impact the investment cycle, put brakes
on growth, increase EMI burden and the overall cost of living.
However, not all El Nino years led to a drought in India. For instance, 1997/98 was
a strong El Nino year but there was no drought. On the other hand, a moderate El
Nino in 2002 resulted in one of the worst droughts.
Even if El Nino occurs it may not necessarily impact the monsoon as it all depends
on when the El Nino sets in.
IMPACT OF EL NINO ON THE INDIAN ECONOMY

10. Let us see the formula of the Current Account Balance (CAB)
CAB = X - M + NI + NCT
X = Exports of goods and services
M = Imports of goods and services
NI = Net income abroad [Salaries paid or received,
credit / debit of income from
FII & FDI etc. ]
NCT = Net current transfers [Workers' Remittances
(unilateral),
Donations, Aids & Grants,
Official, Assistance and
Pensions etc]
CURRENT ACCOUNT DEFICIT
Hope you have understood the
phenomenon of El Nino and how it
can impact the Indian Economy.
IMPACT OF EL NINO ON THE INDIAN ECONOMY

11. Please give us
your feedback at
professor@tataamc.com

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