el nino.doc

8/10/2019 El Nino.doc

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There is a looming fear of an El Nino in Indian markets. It hasreceived high amount of coverage in the press also. This couldimpact the prospects of growth in earnings as food inationwould rise and to rein in ination, the Reserve Bank of Indiamight maintain rm interest rates. But what eactl! is ElNino" #ow El Nino is caused" $nd how critical it is in Indiancontet especiall! given the increasing optimism of a sta%legovernment at the centre.

$n El Nino is a temporar! climate change of the &acic oceanin the region around the e'uator. The surface of the oceanwarms up %! a few degree (elsius, which can have hugeimpact on world)s climate.

The basics

a) Cause of El Nino

*ostl!, it is o%served that the wind %lows strongl! from eastto west along the e'uator in the &acic. This actuall! createsecess water in the western part of the pacic. In the easternpart of the pacic, deeper water gets pulled up from %elow toreplace the water that veered towards the west. It isimportant to understand that the eastern part of the pacic

has cold water, while the western part has warmer water. +o,in an El Nino situation, the winds move, some water

In an El Nino, the winds pushing that water around getweaker. $s a result, some of the warm water piled up in thewest slumps %ack down to the east, and not as much coldwater gets pulled up from %elow. Both these tend to make thewater in the eastern &acic warmer, which is one of thehallmarks of an El Nino.

But it doesnt stop there. The warmer ocean then a-ects thewindsit makes the winds weaker/ +o if the winds get weaker,then the ocean gets warmer, which makes the winds getweaker, which makes the ocean get warmer ... this is called apositive feed%ack, and is what makes an El Nino grow.

So what makes it stop growing?


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The ocean is full of waves, %ut !ou might not know how man!kinds of waves there are. Theres one called a Ross%! wavethat is 'uite unlike the waves !ou see when !ou visit the%each. Its more like a distant cousin to a tidal wave. Thedi-erence is that a tidal wave goes ver! 'uickl!, with all thewater moving prett! much in the same direction. In a Ross%!wave, the upper part of the ocean, sa! the top 011 meters orso, will %e leisurel! sliding one wa!, while the lower part,starting at 011 meters and going on down, will %e slowl!moving the other wa!. $fter a while the! switch directions.Ever!thing happens ver! slowl! and inside the ocean, and !oucant even see them on the surface. These things are so slow,the! can take months or !ears to cross the oceans. If !ou had

the patience to sit there while one was going %!, !oud hardl!notice it2 the water would %e moving onl! 03011th of walkingspeed. But the! are large, hundreds or thousands ofkilometers in length 4not height/ Remem%er, !ou can hardl!see them on the surface5, so the! can have an e-ect on things.

$nother wave !ou rarel! hear a%out is called a 6elvin wave,and it has some characteristics in common with Ross%! waves,%ut is somewhat faster and can onl! eist close to the e'uator4sa!, within a%out 7 degrees of latitude around the e'uator5.

El Ninos often start with a 6elvin wave propagating from thewestern &acic over towards +outh $merica. &erhaps !ou saw,on the T8 news, the movie 4produced %! 9&:5 for the El Ninoof 0;;


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?*ore Technical Eplanation? link for more information. Themain point is that it shuts o- when the these funn! interiorocean waves travel all the wa! over to the coast of $sia, getreected, and travel %ack, a process that can take man!months.

What eects does it have?

$ strong El Nino is often associated with wet winters over thesoutheastern A+, as well as drought in Indonesia and

$ustralia. 6eep in mind that !ou arent guaranteed thesee-ects even though there is an El Nino going on2 %ut the ElNino does make these e-ects more likel! to happen.

ow long does it last?

$ strong El Nino can last a !ear or more %efore conditionsreturn to normal. If !ou read the %it a%ove a%out Ross%! and6elvin waves 4!ou did, didnt !ou"5 then !ou know that it lastsmore or less as long as it takes the interiorocean waves totravel all the wa! over to the coast of $sia, get reected, andtravel %ack. ou can also look at the #istorical El Ninosection, which has a plot showing the last C1 !ears of ElNinos, and Dudge for !ourself.

ow often do we get them?

El Ninos happen irregularl!, %ut if !ou want to impress peopleat cocktail parties, !ou might mention that we usuall! get oneever! three to seven !ears. Note the word ?usuall!?sometimes the! turn up more fre'uentl!, sometimes less. oucan also look at the #istorical El Nino section, which has aplot showing the last C1 !ears of El Ninos, and Dudge for

!ourself 4deDa vu5.

ow well can we predict El Nino?

Fn average, comple computer models designed to predict ElNino can successfull! do so 0G to 0= months in advance.#owever, it seems to var! %! episode2 sometimes El Ninos arepredicted 'uite well, with plent! of advance notice from the


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models, while other times the! are predicted poorl!, with themodels not picking them up until the El Nino has alread!started.

The !ndian conte"t

The much talkeda%out El Nino, which ma! a-ect Indias+outh>est monsoon, ma! hit the @07 H& growth rate, pushination higher and has the potential to slow down the %ullpart!, sa! anal!sts.

El Nino impacts the atmosphere and increases temperature,which could further disrupt rainfalls. The Reserve Bank ofIndia has also warned that this adversit! can impact the !ield,

which could further trigger the ination rate a%ove =.7J andma! result in hiking rates further, which could impact theIndia Inc investment c!cle and put %rakes on the growth rate.

?In m! view, the industr! which has eposure to agricultureand infrastructure segments would get directl! impacted.(ompanies which are in fertiliKer and other agrirelated%usinesses such as &I IndustriesB+E G.


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%elow normal monsoon rains this !ear %ecause of an El Ninophenomenon developing in the &acic Fcean, 'uoting +k!met,a elhi%ased private sector weather forecaster. In a forecastfor the 9une+eptem%er rain! season released on Tuesda!,+k!met said monsoon in India is likel! to %e ;M per cent of itslong period average 4:&$5, which means the countr! will get=; mm of rainfall during the four months.

#n !n$ation

$ strong El Nino in India would trigger lower production ofsummer crops such as rice, sugarcane and oilseeds. In G11;,El Nino turned Indian monsoon patch!, leading to the worstdrought in nearl! four decades which helped push glo%al

sugar prices to their highest in around C1 !ears.

It could %e %ad news for Indian agriculture conditions in the&acic Fcean seem to %e increasingl! favouring the onset ofan El Nino this summer, +*( said in a report. The weatherdepartment would issue it its monsoon forecast in the lastweek of $pril. #owever, the clarit! on El Nino conditionswould emerge latest %! 9une. *onsoon usuall! arrives overthe Indian su%continent through the southern state of 6erala%! end*a! or the rst week of 9une, the report added. Earlier

this week, +ingaporean %ased %rokerage rm B+ saidination in India ma! Dump to over =.7 per cent and H&growth ma! slip to 7 per cent in the current scal if the muchfeared El Nino threat pla!s out this !ear. The El Nino entailsunusuall! warm temperatures which disrupt rainfalls, while inthe domestic contet, it has %een o%served that the incidenthas coincided with weak +outhwest monsoons. ?ElNino couldpush the (&I 4 consumer price inde5 ination o- the RBIsglide path and up to = per cent %! 9anuar! 07. Even amoderate 7 per cent increase in food inde could lift headline

ination to =.7 per cent,? the B+ noted said.

!mpact on %&' %rowth(

$fter formation of the new government, most anal!sts epectIndias H& growth to %ounce %ack and head higher from thecurrent levels. Nut, if El Nino pla!s out as epected, there is a


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high change that it will hit the @07 H& growth rate. Indiasgrowth is epected to improve in G10M, the International*onetar! @und said last week. In G10C, Indias growth ratestood at M.M per cent.

@or India, real H& growth is proDected to strengthen to 7.Mpercent real H& growth is proDected to strengthen to 7.M percent in G10M and .M per cent in G107, assuming thatHovernment e-orts to revive investment growth succeed andeport growth strengthens after the recent rupeedepreciation,? the I*@ report said.

el nino.doc

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