Rain, shine and rising prices: climate-related drivers of food inflation in India

Arunima Sharan, Juan Pablo Martinez Martinez, Joe Feyertag, Sujata Kundu and Renu Kohli

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The growing frequency and intensity of heat stress, excess rainfall, floods and storms may be reshaping the structure of food inflation. These trends challenge a long-standing assumption about inflation targeting: that supply shocks are temporary, idiosyncratic and short-lived. In India and other climate-vulnerable economies, central banks may find themselves managing a structural inflation environment with tools designed for a cyclical one. This policy brief examines the mechanisms through which physical climate impacts transmit into rises in food prices at the subnational level in India, and then into headline and core inflation. The authors provide an empirical foundation for changes to forecasting frameworks, communication and the inflation-targeting architecture that the Reserve Bank of India (RBI) is already beginning to consider.

JEL-codes: F3 G3 J01 R14 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2026-06-12
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