An arid August | Mint

August saw average temperatures in India hit their highest in nearly a century and a quarter, as El Niño conditions dried up rainfall. Though September is expected to see a rain revival, the Indian monsoon may fall short of what qualifies as normal. This bodes badly for India’s economy. If this month also turns out drier than expected, it may not be possible to prevent crop damage, which could lead to shortages in farm supplies and stoke food inflation, with enlarged risks of this price rise getting generalized. Note that core inflation has been hot, too. It would put the Reserve Bank of India in a tight spot, as its price stability programme may not be able to count on a cool-off that could turn its policy pause into a pivot for cheaper credit. Also, bad harvests would hurt farmer incomes and, therefore, rural demand for everything from consumer goods to two-wheelers. The government’s export restrictions on some commodities would help shore up domestic supplies and check prices. But, such curbs must not extend long if farmers are to get a fair opportunity to benefit from high global market prices. Trade barriers are a double-edged sword that policymakers must wield judiciously.