RBI Highlights Risks of El Niño and Geopolitical Tensions in Annual Report

The Reserve Bank of India's latest annual report raises alarms about the potential economic risks posed by a possible El Niño event and ongoing geopolitical tensions. It highlights how these factors could affect inflation and food supplies in India. The report also notes that while inflation remained stable in 2025-26 due to strong food production and lower global commodity prices, the RBI emphasizes the need for vigilance as uncertainties loom. With predictions of a below-normal monsoon season, the RBI stresses the importance of monitoring weather conditions closely. This report serves as a crucial reminder of the interconnectedness of climate and economic stability.

By Narendra Chaudhary May 29, 2026, 15:59 IST

RBI's Annual Report Warns of Economic Risks

In its annual report released on May 29, 2026, the Reserve Bank of India (RBI) has issued a warning regarding potential risks associated with a possible El Niño phenomenon. The report emphasizes that an uneven distribution of monsoon rainfall, coupled with ongoing geopolitical tensions such as the conflict in West Asia, could adversely affect economic growth.

The RBI's findings indicate that headline inflation remained relatively stable during the fiscal year 2025-26, largely due to strong food grain production, declining global commodity prices—especially in food and energy—and effective supply management strategies implemented by the government.

However, the report also notes that "some price pressures began to surface due to the outbreak of conflict in West Asia." Looking forward, the RBI highlights the need for vigilance in light of uncertainties stemming from prolonged geopolitical conflicts, increasing energy costs, fluctuations in currency, changing trade policies, and weather conditions—particularly the potential for El Niño and below-average monsoon rainfall.

According to the report, as of March 2026, the Food Corporation of India held more than four times the required buffer stock of food grains, primarily due to an excess of rice. The government has allocated 52 lakh tonnes of rice from this surplus for ethanol blending, and export restrictions on wheat and wheat products have been partially eased.

Despite these measures, the possibility of an El Niño event poses a significant risk to India's inflation and monetary policy. The RBI continues to warn that weather-related disruptions could threaten food supplies, and it stresses the importance of closely monitoring the likelihood of El Niño during the upcoming kharif season.

This concern regarding El Niño coincides with predictions from the India Meteorological Department, which has forecasted a below-normal monsoon season. The anticipated rainfall from June to September is projected to be around 90% of the long-term average, indicating a potential shortfall, with an error margin of ±4%.