In today’s Finshots, we discuss El Niño and why India is fearing its inflationary effect this year
The Story
In the 1600s, Peruvian fishermen noticed something odd. During certain periods, the sea water turned warmer. And their catch of fish dwindled too. This affected their livelihood. But they didn’t really know what was happening or why. And because it occurred typically around Christmas time, people in the region called this phenomenon El Niño. It meant ‘the Christ child’.
But it took another 300 years before scientists explained to us what was really going on. Climatologist Sir Gilbert Walker and his team figured out it was linked to something called the Southern Oscillation over the tropical Pacific Ocean.
See, in a normal scenario, the winds around the equator move west from South America to Australasia (Australia, New Zealand and some neighbouring islands in the Pacific Ocean). This pushes the warm water in the eastern Pacific (that’s near Peru) away towards Asia. And when the warm water is displaced, the cold nutrient-rich water from the depths would rise (or upwell) to replace it. It’s the cool water that the fish are after.
But every once in a while, the cycle changes. The atmospheric pressure builds up over Australasia and the winds reverse direction. It moves from west to east now. And El Niño rears its head. The seawater around the Peruvian coast warms up. The temperature rises anywhere from 1°C to 3°C compared to normal. And the fish disappear.
The scientists called this the El Niño Southern Oscillation (ENSO).
Now while we only spoke about Peru so far, El Niño affects everyone. It has a ripple effect across the globe. Or in climate science terms, it has a teleconnection — how geographically distinct areas are affected by a singular weather pattern.
This includes India.
You see, when El Niño arrives, the complex dance involving atmospheric pressure, winds, and sea temperatures affects the monsoons. How, you ask?
Well, while the ocean water around Peru warms up, the opposite happens on the Asian side of things. And warmer waters allow for more evaporation and condensation in the atmosphere. Cooler water translates into fewer rain clouds hovering over the region. And instead of a bountiful monsoon, we could suffer from a lack of it. Also, depending on its severity, we could even face drought. Some estimates suggest that 60% of droughts in India over the past 130 years have been linked to an El Niño event. And by drought, we mean instances when rainfall is just 10% below normal.
Now, that seems like a cause for worry, no?
Because as per FY21 estimates agriculture contributes to roughly 20% of India’s GDP. And various reports say that 40–60% of India’s cultivated land depends on the monsoons. So when the monsoon isn’t what it’s supposed to be, it can have huge ramifications.
Remember the kharif and rabi crop lessons from your school days?
Well, those are the two main crop seasons in India.
We sow kharif crops like rice, maize, and soybean during the first onset of the monsoon. And that makes them quite dependent on rainfall. Without adequate rain, the yields could be lower. And researchers who looked at data from 1966 to 2011 have indicated that El Niño greatly affects the final output.
During the retreating monsoons starting in November, we sow rabi crops, such as wheat and mustard. And while these crops don’t depend on the rains, you still need good monsoons to maintain groundwater and reservoir levels. Otherwise, irrigation becomes tough. Yields could drop.
It’s not a great omen for India which is one of the world’s largest consumers of both rice and wheat.
Also, with falling agricultural output comes the problem of reduced rural incomes. With about 60% of rural households engaged in agriculture, they could tighten their purse strings and cut back on spending. It could hurt discretionary spending. Even vehicles for that matter — Maruti Suzuki has already stated that it’s worried about the impact of El Niño on its sales. It can even hurt sales of the FMCG (fast-moving consumer goods) category if people cut back on personal care products and biscuits and stuff too. After all, rural India accounts for nearly 40% of FMCG sales.
On the other hand, it could put quite a bit of pressure on our electricity grid. Urban India could crank up their cooling devices to beat the heat. And the signs of things to come are already here. In January, for instance, the Weather Channel reported that the demand for electricity peaked at 211 gigawatts. It’s already almost hit the all-time high we witnessed last summer. And it isn’t even summer yet. If El Niño emerges and heats up India even more, our electricity demand could shoot up by 20–30%. And we could be facing power shortages.
Put all of these together, and you’ll have a great recipe for inflation. It could give another reason for the central bank to tighten monetary policy. They could raise interest rates further and it’ll be a blow to an already slowing economy.
Simply put, it affects our monsoon and everything and everyone that’s dependent on it. So yeah, you can see why when there’s a warning of an impending El Niño, everyone gets worried.
But before you panic, remember that some studies show that around 30% of the monsoon vagaries in India are explained by ENSO. There’s still a whole host of other factors such as the IOD (Indian Ocean Dipole) too which has a bearing on the rains. And going by that, we don’t need to panic about an El Niño declaration. We just need to be prepared.
On the other hand, there are regions which cheer El Niño too.
The International Monetary Fund observed that when the harshest El Niño phase swept over the globe in 1997–98, the US GDP had a net gain of about $15 billion or 0.2%. All thanks to wet weather around California that helped crops like lime, almonds and avocado. And fewer hurricanes or tornadoes that typically hurt some states.
This positive effect even spills over to nations it traded with. The US accounted for 19% of China's total trade. And when the US gained, it passed on these benefits to China too. So even though China wasn’t aided directly by El Niño, it still pushed up its economy by about 0.6%.
So yeah, as with everything else in life, even El Niño is not all black and white.
Anyway, we’re not certain yet that 2023 will indeed be the year of El Niño. The Institute of Climate Change Studies (ICCD) says that it’ll be a drought-like year. But the India Meteorological Department (IMD) says that we’ll only have a clear picture by April.
How will it all pan out? Only time will tell.
Until then…
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