India: Forget the rains Why RBI may need a thermometer

Research evidence excerpt

India: Forget the rains Why RBI may need a thermometer

11 May 2026

India: Forget the rains EconomicsIndia

Why RBI may need a thermometer

◆ Average temperatures and food price sensitivity to heat are Pranjul Bhandari

rising; temperature is outperforming rains in forecasting inflation Chief India Economist/Strategist, ASEAN Economist

The Hongkong and Shanghai Banking Corporation

Limited, Singapore Branch

◆ In El Niño years specifically, temperature spikes have become pranjul.bhandari@hsbc.com.sg

more likely than rainfall deficit; and these spikes are intensifying +65 6658 4976

Aayushi Chaudhary

◆ With twin energy and El Niño shocks, we forecast FY27 inflation Economist, India, Indonesia & Sri Lanka HSBC Securities and Capital Markets (India) Private

at 5.6%, GDP at 6%, and two rate hikes over 4Q26 and 1Q27, Limited

aayushi.chaudhary@hsbc.co.in

taking the repo rate to 5.75% (earlier: hold) +91 22 2268 5543

A couple of years ago, we pointed out that reservoir levels matter more than rains for

India’s food production and inflation. More recently, we took our next leap—from rains

and reservoirs, to temperatures. With global warming, average temperatures are rising

and have crossed previous thresholds. They now impact food output and inflation much

more than even rains and reservoirs do. In fact, tracking surface temperature is enough to

get a good sense of where food inflation is headed.

This matters a lot more in a likely El Niño year. We find that the probability of high

temperatures is stronger than the probability of low rains, and the quantum of rise in

temperatures during El Niño years is rising. No crop escapes. Perishables like

vegetables and fruits are traditionally more sensitive to heatwaves, and this

sensitivity is rising.