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Heatwave credit negative for India

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 climater 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 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.
Moody's also said that further drawdowns in coal inventory could lead to prolonged power outages in industrial and agricultural production, leading to significant cuts so output and weighing futher on India's economic growth particularly if the heatwaves continue beyond June.
A rise in prices across all items from fuel to vegetables and cooking oil pushed WPI or wholesale price inflation to a record high of 15.08 per cent in April and retail inflation to a nearly eight-year  high of  7.79 per cent. This prompted the Reserve Bank to hold an unscheduled meeting to raise the benchmark interest rate by 40 basis points to 4.40 per cent earlier this month.

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