India’s current monsoon deficit is the highest since fiscal year 2016 (FY16), driven primarily by strengthening El Niño conditions. Gaura Sen Gupta, economist at IDFC First Bank, highlights that India’s reservoir levels are running below their 10-year average and, combined with uneven spatial distribution, threaten both kharif and rabi crops. This unfavourable dynamic raises the risk that food inflation will remain elevated, especially for perishable items. In an interview with Mint, Sen Gupta warns of stress in rural demand post-harvest in the March quarter (Q4FY27), which could, in turn, dampen rural consumption. Edited excerpts:
India’s overall cumulative rainfall is still 13.5% below normal (as on 4 September). In terms of macro-economic impact, how does the current deficit compare to past deficit years of 2014, 2015, and 2018? Do we have adequate buffers (irrigation coverage or food grain reserves) to tackle this situation?
The current monsoon deficit is the highest since FY16, when the rainfall deficit was 13.8%. The weakness in the monsoon is due to very strong El Niño conditions. There are adequate food grain stocks, which mitigate some of the inflation risk for cereals. However, perishables remain a challenge as they can’t be stored. Kharif sowing remains marginally below last year's levels, with rice sowing tracking below last year's.
The area under irrigation has improved over the years, reaching 60% coverage. However, substantial sowing still depends on monsoon performance. Moreover, reservoir levels are tracking marginally below normal levels and could reduce further if rainfall momentum weakens in September. El Niño conditions are expected to continue to strengthen and likely peak in November-December. Reservoir levels are important for rabi crops, which are reliant on irrigation facilities
We are heading towards the last leg of the monsoon, and spatial distribution has been uneven, but remains a crucial factor. How has kharif sowing fared so far this year compared to the historical average?
Kharif sowing has held up better than expected, tracking 1.5% below last year. Rice, which is the main kharif crop, is tracking lower than last year by 3.7% year-on-year. Other crops, such as pulses, coarse cereals and oilseeds, are largely close to last year's sowing levels. The drop in rice sowing may reflect deficient rainfall in Punjab (9.6% share of total rice production) and Telangana (9.4% share of total rice production).
Reservoir deficit in the southern and central peninsular is feared to hamper the upcoming rabi sowing for major water-intensive crops like rice, gram, and barley. How grave is the threat to crop yield?
Rabi sowing is reliant on irrigation facilities, and from that perspective, reservoir levels need to be monitored. Currently, reservoir levels are marginally below normal (10-year average), and rainfall is expected to be below normal in September. This could further reduce reservoir levels.
Crop yield could be impacted given the uneven distribution and temperature fluctuations. Strong El Niño conditions could result in warmer winters.
Considering that several major agricultural states have experienced sub-par rainfall, what are the implications for agricultural gross value added (GVA) growth in FY27?
The one key positive is that over the years, the share of crop value added in agri GVA has been reducing, while that of the allied sector has been rising. Currently, it’s nearly a 50-50 division. Hence, over the years, the negative impact on agri GVA due to weak monsoon has reduced. That said, some negative impact is still expected on agri GVA growth, with a potential negative impact on crop output, especially rabi. The impact on agri GVA would be visible in Q4FY27, post the harvest season.
As per the India Meteorological Department, the current moderate El Niño conditions could intensify in the remainder of the season. Should one write off rural consumption as an economic growth driver this year?
There will be some negative impact on rural demand, especially post the harvest season in Q4FY27. But there are factors which will partly support rural demand; these include targeted income schemes of state governments and the rising share of allied sectors. For now, the high frequency shows that rural demand has held up in Q1FY27.