Apart from the West Asia crisis, progress of the monsoon is a critical factor affecting the view on India’s economy. Rainfall in June was in a 40% deficit, raising concerns around agricultural production and overall economic growth.
While rainfall has improved markedly in July, its cumulative figure remains in deficit. Poor rainfall has resulted in a decline in kharif crop sowing of 16% (as of 10 July) compared to the previous year.
Rainfall in the coming months will be critical as July and August together receive about 60% of the total seasonal rainfall. Given the impact of El Niño this year, the India Meteorological Department has projected a sub-normal monsoon at 90% of the long-term average.
While monsoon rains have a bearing on India’s agricultural growth, their impact has been falling over time. Our analysis using 20-year rolling regressions shows that the linkages between rainfall deviations and agricultural growth as well as overall gross value added (GVA) growth have weakened over time.
Illustratively, in the two decades spanning 1965-66 to 1984-85, years with sub-normal rainfall saw average agricultural GVA contract by an average of about 4%. The linkage began to weaken thereafter. Agricultural GVA contracted less in the next two decades during episodes of subnormal rainfall.
In the decade from 2005-06 to 2014-15, agricultural GVA grew an average 1.3% during episodes of subnormal rainfall; and in the latest decade (2015-16 to 2024-25), it grew a healthy 3.8% on average.
In the last decade, agricultural GVA growth during periods of normal and above-normal rainfall averaged 5.1%. This shows that while a deficient monsoon does hurt agricultural growth, the sensitivity has been reducing.
Drivers that enabled this transformation are structural. A marked rise in irrigation coverage has aided the sector’s resilience. Gross irrigated area has increased from 17% of gross sown area in 1950-51 to nearly 60% in 2023-24.
The government’s efforts to push climate-resilient crop varieties may also be paying off. Under the National Agricultural Research System led by the Indian Council of Agricultural Research, 2,996 climate-resilient crop varieties were released during 2014-2025.
In addition, the government’s efforts to promote sustainable farming and crops that require less water, such as millets and pulses, may also be playing a role in reducing the dependence of output growth on rainfall.
The share of agriculture in the economy is 18%. However, around 43% of India’s workforce is employed in the agricultural sector. Hence, any adverse impact on the sector raises concern around overall consumption demand in the economy.
There has been some income diversification in the sector, with a rise in the share of agri-allied sectors such as livestock, fisheries and horticulture. Livestock’s share in agricultural income has risen from 24% in 2011-12 to 33% in 2023-24, while for fisheries and aquaculture it has increased from 4.4% to 7.5%. The share of income derived from crop production has declined from 63% in 2011-12 to 53% in 2023-24.
Although this diversification provides some resilience, crop production continues to account for a substantial share of income, leaving rural incomes vulnerable to disruption induced by poor rainfall.
The other big concern is the monsoon’s impact on inflation. Consumer price index data for June already shows a jump in food inflation to 5.3% from about 3% in the first quarter of 2026. We expect food inflation to climb to around 7% in the October-December quarter and average about 6% for 2026-27.
El Niño-induced heatwaves can disproportionately affect prices of perishables such as tomatoes, onions and potatoes, which have frequently been responsible for spikes in food and headline inflation.
Pulses warrant close attention too. According to a Niti Aayog report, 15 El Niño episodes since 1951 have been associated with declines in pulse acreage and productivity. Risks also stem from the prices of edible oil, for which inflation is already high at 10% and may increase further since El Niño will hurt key producer countries such as Malaysia and Indonesia.
Past data shows that while some episodes of deficient rainfall have led to higher food inflation, that is not always the case. Factors such as high foodgrain buffer stocks, supply-side interventions by the government and stable global commodity prices helped cap price pressures for food items in some monsoon-deficit years.
Overall, the recovery in monsoon rainfall in the coming months and the spatial and temporal distribution of rainfall will be critical to assess the overall impact on the agricultural sector. A poor monsoon does hurt agricultural output and overall economic growth, but the relative impact has clearly been reducing over time.
This year, grain stocks were at record levels as of the end of April, assuring policymakers some headroom to manage any production shortfall. However, production of some of the other food crops remains a concern. In conclusion, it will be critical to monitor the impact of a weak monsoon on food inflation and overall rural income.
These are the authors’ personal views.
The authors are, respectively, chief economist and senior economist, CareEdge Ratings.