Weather risks from possible El Nino and global tensions could pressure inflation in 2026: SBI report
New Delhi, March 14
Weather patterns along with ongoing geopolitical risks affecting global energy prices could adversely impact inflation in 2026, according to a report by State Bank of India.
The report highlighted that the recent forecasts for global weather patterns indicate a possible build-up of El Nino in 2026.
It stated "Weather patterns along with ongoing geopolitical risk affecting the energy prices can adversely impact inflation in 2026"
According to the report, the latest trends in the Nino 3.4 Sea Surface Temperature (SST) Index show that the El Nino-Southern Oscillation is currently in a neutral phase but may transition to a positive phase either in 2026 or in the latter part of 2026.
The report noted that the Indian monsoon is influenced by both ENSO (El Nino-Southern Oscillation) and movements of the Indian Ocean Dipole (IOD). It explained that the occurrence of El Nino along with a negative IOD typically leads to a deficient monsoon.
Currently, the IOD is in a negative phase, and forecasts suggest that the probability of El Nino forming ranges between 40-60 per cent.
Such weather developments could have a significant impact on agriculture and food supply, which in turn may influence inflation dynamics in India.
Apart from weather-related risks, the report also pointed to geopolitical developments affecting global commodity markets. It noted that despite claims from the United States and its allies, the ongoing war has continued and has resulted in a near shutdown of maritime trade.
The report said that the conflict has also disrupted production, while the lack of adequate storage capacity has resulted in oil being held on water, often referred to as "oil on water". This situation has added pressure on commodity markets.
According to the report, the disruption has intensified speculation in commodity markets while also reflecting genuine demand from multiple regions.
The report emphasised that the importance of communication and coordinated action has increased in the current global environment. It suggested that alternative arrangements for energy security and rational measures to curb energy usage could help mitigate the adverse effects.
It stated "the unwarranted consequences of a war that benefits and enriches a select few, while raising hardships for the world at large by multiple times, its wrath most evident on the fringe".
— ANI
Reader Comments
SBI report is spot on. Global tensions are already making petrol and LPG cylinders expensive. If monsoon fails in 2026, prices of vegetables and pulses will shoot up. Common man's budget will be completely ruined.
The report's line about war enriching a select few while the world suffers is very strong. It's true. We in India get caught in the crossfire of global politics that we didn't start. Hope our diplomacy can shield us from the worst.
Living in Mumbai, I see how connected we are to global trade. If maritime routes are disrupted, everything gets costlier. We need to invest more in renewable energy and local supply chains to be less dependent.
Forecasting for 2026 is good, but what about 2024? We are already facing high prices. The government and RBI should focus on controlling current inflation. Too much future-gazing can make us ignore present problems.
This is a wake-up call. We waste so much food and water in this country. If we are serious about food security, we need massive public awareness campaigns on conservation and reducing waste. Jai Jawan, Jai Kisan... and now Jai Paryavaran (environment).
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