Weak monsoon may fuel inflation in India, hit rural demand: S&P Global Ratings
Raising some concerns, the rating agency, S&P Global Ratings in its latest report has said that a weak monsoon in India may lead to higher inflation, weaken rural demand and strain fiscal balances.
As per the report, rural economy in the country faces a dual threat from an unusually dry southwest monsoon and higher agro-input costs driven by geopolitical conflict. The rating agency identifies the agricultural sector as the most exposed segment. It said farmers face lower yields and therefore lower incomes. This will have knock-on effects for food prices and tractor and two-wheeler manufacturers.
S&P Global Ratings further noted that banks could see slower credit growth and modest deterioration in asset quality but limited earnings impact. According to it, microfinance institutions are more exposed due to larger rural exposure and weaker borrower profiles.
