Prolonged high temp could worsen inflation: Moody's

New Delhi: Prolonged high temperatures are credit negative for India, as that could exacerbate inflation and hurt growth, Moody's Investors Service said on Monday.

Over the longer term, India's highly negative credit exposure to physical climate risks means its economic growth will likely become more volatile as it faces increasing, and more extreme incidences of climate-related shocks, it noted.

The rating agency said although heat waves are fairly common in India, they usually occur in May and June. However, this year New Delhi witnessed the fifth heatwave in May with the maximum temperature touching 49 degrees celsius.

"The prolonged high temperatures, which are affecting much of the northwest of the country, will curb wheat production and could lead to extended power outages, exacerbating already high inflation and hurting growth, a credit negative," Moody's said.

The Indian government has revised down its estimates for wheat production by 5.4 per cent to 105 million tonnes for the crop year ending June 2022, given lower yields amid higher temperatures.