RBI Monthly Bulletin: Monsoon shortfall could weigh on growth, inflation outlook

📌 Summary:

• The RBI''s ''State of the Economy'' article (in the monthly bulletin) warns that an adverse south-west monsoon, if it materialises, could weigh on India''s growth and inflation outlook
• IMD''s updated forecast (May 29, 2026) projects below-normal SWM rainfall this year; the monsoon reached Kerala on June 4 (three days late) and cumulative June 1-21 rainfall is significantly below normal
• Reservoir levels have slipped below last year but remain above the decadal average
• Buffer/cushion: robust wheat procurement after last year''s good harvest; FCI rice and wheat stocks are well above buffer norms, a strategic cushion against supply disruption or price spikes from a likely El Niño
• The Monetary Policy Committee (MPC), in its June 5 meeting, cut the growth projection from 6.9% to 6.6% and raised the inflation forecast from 4.6% to 5.1%, citing elevated oil prices, global trade uncertainty, adverse weather and geopolitics
• Any breakdown of the interim US-Iran peace deal could reignite inflation expectations, disrupt energy infrastructure, delay investment, and threaten food security and financial stability
• High-frequency indicators still suggest sustained momentum, with strong domestic demand in May

🎯 UPSC Relevance: GS3 Economy — monetary policy, growth-inflation trade-off, monsoon dependence of agriculture/economy, food security buffers and external risks

📝 Prelims Facts:

• MPC (June 5 meeting): growth projection 6.9% → 6.6%; inflation 4.6% → 5.1%
• IMD forecast (May 29, 2026): below-normal SWM rainfall; monsoon onset over Kerala June 4 (normal: June 1)
• FCI maintains buffer stock norms for rice and wheat
• El Niño tends to suppress the Indian monsoon

🔑 Key Term: Buffer stock — food grain reserves (rice/wheat) held by FCI to stabilise supply and prices and ensure food security