How Super El Nino could threaten India's growth story

The International Monetary Fund (IMF) on Thursday said India continued to be an engine of global economic growth, with strong domestic demand and services activity supporting its expansion, even as potential risks from the Super El Nino weather phenomenon remained a concern.

The IMF said the adverse economic effects of the weather event had not yet materialised in India but warned that lower agricultural yields, rising food prices and reduced household purchasing power could pose challenges to growth.

Speaking at a press conference, IMF Communications Director Julie Kozack said the Fund was closely monitoring the potential consequences of the weather phenomenon and would reassess India's growth projections in its January World Economic Outlook (WEO) update if the risks materialised.

“So these are risks that we see that India faces, but right now those risks have not materialised,” Kozack said.

𝗦𝘂𝗽𝗲𝗿 𝗘𝗹 𝗡𝗶𝗻𝗼 𝗽𝗼𝘀𝗲𝘀 𝗿𝗶𝘀𝗸𝘀

The IMF identified agricultural production and food inflation as two areas particularly vulnerable to the effects of Super El Nino.

According to the Fund, adverse weather conditions could affect crop yields, resulting in higher food prices and putting pressure on household purchasing power.

Such developments could influence domestic consumption, which remains an important driver of India's economic expansion.

Kozack, however, emphasised that these concerns were currently potential risks rather than developments already affecting the country's growth performance.

“So, we see it really as a risk going forward, and of course depending on whether that risk materialises, we will reassess our growth projections for India the next time in our January WEO update,” she said.

𝗜𝗠𝗙 𝗿𝗮𝗶𝘀𝗲𝘀 𝗴𝗿𝗼𝘄𝘁𝗵 𝗳𝗼𝗿𝗲𝗰𝗮𝘀𝘁

Earlier this month, the IMF revised India's economic growth projections upwards to 7 per cent for both fiscal years 2027 and 2028.

The revised estimates represented an increase from the Fund's July projections of 6.4 per cent for FY27 and 6.7 per cent for FY28.

The updated forecasts were published in the IMF's World Economic Outlook report released in Bangkok earlier this month.

Kozack said the improved outlook reflected the continued strength of domestic demand and robust activity in India's services sector, which have supported the country's economic performance.

The IMF maintained that these factors were helping sustain growth momentum despite uncertainties associated with weather-related disruptions.

𝗗𝗼𝗺𝗲𝘀𝘁𝗶𝗰 𝗱𝗲𝗺𝗮𝗻𝗱 𝘀𝘂𝗽𝗽𝗼𝗿𝘁𝘀 𝗲𝘅𝗽𝗮𝗻𝘀𝗶𝗼𝗻

The IMF official said India's economic fundamentals remained strong, with domestic consumption and services activity continuing to provide momentum to the economy.

“But for now what we see is quite strong growth momentum in India, and it continues to be an engine of growth,” Kozack said.

The Fund indicated that any future revision to India's growth outlook would depend on whether the anticipated weather-related risks translated into measurable economic consequences.

For the present, the IMF has maintained its 7 per cent growth projections for both FY27 and FY28, while identifying the potential impact of Super El Nino on agricultural output, food inflation and household purchasing power as an area requiring continued monitoring.