El Nino is raising its head; expect a drier monsoon this year

India may receive below-normal rainfall this year as the shadow of El Niño rises, raising concerns over farm output, rural demand and inflation in Asia’s third-largest economy.

The south-west monsoon, which waters most of India's farmlands, may be just 92% of its 50-year average this year, the India Meteorological Department (IMD) said, with 96-104% considered normal. The last below-normal monsoon occurred in 2023 when rainfall was 95%, a time when the government deployed buffer stocks, export curbs and price control to limit the impact on food inflation. Earlier, private forecaster Skymet had projected this year's monsoon at 94% of the long period average (LPA).

“The 2026 southwest monsoon seasonal rainfall over the country as a whole is most likely to be below normal,” IMD director general Mrutyunjay Mahapatra told reporters, adding precipitation is expected to fall in the 90%-95% range. The climate forecast system sees El Niño conditions evolving during the monsoon season, Mohapatra said. El Niño, which is linked to a warming of the Pacific Ocean, is linked to a drier southwest monsoon.

Variance

However, rainfall may vary widely across the wide swath of India, as well as during the progress of the monsoon. According to IMD, Northeast, Northwest and South Peninsular India may see above-normal rainfall. The IMD forecast comes with a model error of plus or minus 5%. Last year, IMD had predicted monsoon to be almost 105% of LPA, while the final figure stood at 108%.

Madan Sabnavis, chief economist, Bank of Baroda, noted that this comes after a similar prediction from Skymet. "This is significant as both the forecasts do highlight caution on the agricultural front. While this may still be too premature to draw conclusions, at this stage, it suffices to say that with the war not seeming like coming to an end, this news is not favourable for inflation. Inflation has come in at 3.4% for March, and is to average 4.6% going by the RBI for FY27."

“Both forecasts highlight risks on the agricultural front,” said Sabnavis. “While it may be premature to draw firm conclusions, the possibility of El Niño developing in the coming months could affect the final outcome.”

According to Sabnavis, the timing of the monsoon’s onset plays a crucial role in shaping cropping patterns. A delayed arrival leads to postponement of sowing. The progress of the monsoon is equally important, particularly for the flowering stage of crops. Its spatial distribution across states is critical, as it determines agricultural prospects in regions lacking irrigation facilities.

Rain-fed

Only about 55% of India's net sown area is irrigated, leaving the rest reliant on rainfall. The country remains heavily dependent on rains that fetch more than 70% of its annual precipitation. Adequate rainfall boosts the farm economy and strengthens rural demand, benefiting sectors ranging from consumer goods to automobiles, and supporting overall economic growth momentum.

“The IMD’s forecast of a sub-par monsoon, at 92% of LPA, is the lowest first long-range forecast in at least 26 years,” said Icra Ltd chief economist Aditi Nayar. “This poses downside risks to GDP growth in FY2027 and upside risks to CPI inflation.”

"This, along with the impending impact of the ongoing crisis in West Asia, poses downside risks to India’s GDP growth in FY2027, while posing material upside risks to the CPI inflation trajectory during the fiscal. While the ample reservoir levels vis-a-vis historical averages pose some comfort, the average CPI inflation for FY2027 could well exceed 4.5%, Nayar said.

For policymakers and markets, the timing and spread of rainfall will be as important as the overall quantum. Delayed onset can push back sowing of key kharif crops such as rice, pulses, maize and soybean, while uneven distribution can affect crop development during critical growth phases.

Dipole hope

At the same time, neutral conditions currently prevail in the Indian Ocean Dipole, a key climate driver defined by temperature differences between the western and eastern Indian Ocean. IMD models indicate a potential shift to a positive phase toward the latter part of the monsoon, which could partially offset adverse impacts.

“A decline in rainfall is likely to negatively impact agricultural productivity, raising concerns over crop yields and farm incomes across the country,” said Prof. Sudhir Panwar, farm expert and former member of the Uttar Pradesh Planning Commission.

India’s agriculture sector had been on a relatively firm footing. The Economic Survey for 2025–26 projected farm growth of 3.1% in the fiscal year ending March 2026, supported by favourable rainfall earlier in the year. Gross value added in agriculture rose 3.6% in the first half, compared with 2.7% a year earlier. Allied activities such as livestock and fisheries have continued to expand at a steady 5%–6%, providing some resilience.

The monsoon outlook also intersects with a fragile global backdrop. Ongoing geopolitical tensions, including the crisis in West Asia, are already posing risks to commodity prices. A weak monsoon could compound inflationary pressures.

FMCG impact

At the moment, there is not much of a worry as far as big FMCG players are concerned, which have contingencies in play like shifting production and moving to more affordable packs to adapt quickly.

“As far as raw materials go, the wheat rabi crop has been good this year, so we are not particularly worried about inflation there. On the demand side, biscuits and snacks remain largely essential categories, though premium segments do see some impact when there is pressure on consumption. In such periods, consumers tend to shift towards more affordable packs, with even premium products being consumed in lower denominations. Rural consumers today are highly aspirational in both their consumption and outlook and are willing to upgrade, but often prefer to do so through smaller, more accessible pack sizes,” said Mayank Shah, CMO, at Parle Products Ltd, which makes biscuits and snacks under brands such as Parle-G, Hide & Seek and Monaco.

“Agriculture in India is inherently unpredictable, and for us the biggest input cost is agricultural commodities, especially spices. Inflation or deflation in crop prices plays a very critical role in our business. While there are always projections around output, we prefer to wait for actual weather events to play out before taking a view," said Sanjay Sharma, CEO, Orkla India, Orkla India manufacturer of brands such MTR, Eastern and Rasoi Magic.

Weather risks

The Reserve Bank of India has already flagged weather-related risks. In its April monetary policy review, the central bank said food prices remain benign in the near term, supported by strong rabi output, adequate reservoir levels and sufficient buffer stocks. However, it cautioned that the potential emergence of El Niño could disrupt the outlook. The RBI projects headline inflation at 4.6% for fiscal 2027, with a gradual rise through the year before easing. Core inflation is seen at 4.4%.

According to Pushan Sharma, Director, Crisil Intelligence, with the southwest monsoon forecast at 92% of LPA (±5%), the upcoming Kharif season and India’s crop production bears watching. However, improved irrigation coverage, now reaching ~56% of net sown area in 2024–25, up from ~49% in 2014–15, has made the sector relatively more resilient to such volatility over time.

"That said, near-term sowing conditions appear relatively supportive. Reservoir storage is relatively strong at around 82.070 BCM as of 9 April 2026, which is 27% above the long-period average (LPA) and approximately 18% higher than the same period last year (69.752 BCM). Given that June is predicted to have relatively normal rainfall, early sowing prospects will be further supported," added Sharma.

According to Sharma, in the latter half of the season, outcomes will also depend on broader climate drivers, including the evolution of El Niño and the possibility of a positive Indian Ocean Dipole (IOD). A positive IOD can partly offset monsoon weakness in some years; however if it strengthens late, it may coincide with the maturation or harvest stages of key crops such as pulses, oilseeds, cotton, maize, and vegetables—raising the risk of crop damage, even as it supports reservoir replenishment and improves the starting point for Rabi 2026–27.