El Niño Threatens India’s Economy as Monsoon Deficit Widens
The India Meteorological Department has forecast that July rainfall will be “below normal” — less than 94% of the monthly average — after June recorded a deficit of nearly 40%. The agency warned that below-normal rainfall could create significant challenges for agriculture, water resources, hydropower generation, ecosystem sustainability, and drinking water availability. Rainfall in June stood at 99.5 mm against a long-period average of 165.3 mm, a fall of 39.8% across all four meteorological subdivisions.
The weak monsoon comes weeks after Union Agriculture Minister Shivraj Singh Chouhan cautioned about the potential impact of a ‘super’ El Niño. “This could directly affect Kharif crops, particularly in rainfed regions where agriculture is heavily dependent on monsoon rains,” he told reporters on June 23, 2026.
A poor monsoon can damage the economy in three ways: it reduces agricultural output, thereby lowering the sector’s contribution to GDP; it hits rural income, depressing aggregate demand; and it threatens to push up food prices, stoking inflation. India entered this kharif season from a strong position — foodgrain output in 2024-25 rose to 357.73 million metric tonnes, up 25.43 million tonnes from the previous year. A weak monsoon now puts that momentum at risk.
CRISIL has noted that while paddy acreage may expand in Punjab, Haryana, and Bihar, maize acreage is expected to decline as farmers shift to more remunerative crops. Farmers may also prefer pulses due to lower cultivation costs and water requirements, and may choose not to plant vegetables at all. Irrigation, minimum support prices, procurement support, and market conditions further influence these decisions. Such shifts could trigger food and beverage inflation.
In its June bulletin, the Reserve Bank of India warned: “An adverse south-west monsoon, if materialised, may weigh on the domestic growth-inflation outlook.” The bulletin noted that CPI inflation rose to 3.9% in May 2026 from 3.5% in April, with broad-based increases across food, fuel, and core components. Daily price data up to June 18 showed food inflation continuing to rise, with prices of edible oils, potatoes, onions, and tomatoes edging up. A weak monsoon, combined with higher global food prices driven by fertiliser, edible oil, and shipping costs, would only push them higher.
Agriculture accounts for about one-fifth of India’s Gross Value Added but employs 46% of the workforce and supports nearly 55% of the population. “It will have a direct impact on the lives of people,” said Prof. R. Ramakumar of the Tata Institute of Social Sciences. Prof. Bharat Ramaswami of Ashoka University estimates farm incomes could fall by up to 10%. “The rural non-farm sector consists mostly of non-traded services such as construction. These sectors contract when agriculture is adversely affected. Industries that depend on rural demand will be affected,” he said.
The stress spreads to the wider economy. Two-wheeler and tractor sales are early signals, followed by real estate in smaller towns and cities. Kotak Mutual Fund has noted that a combined El Niño-plus-drought scenario could shave 20–65 basis points off GDP growth. Compounding the pressure are pest attacks and fertiliser supply constraints linked to the Iran conflict. The Union Cabinet approved a ₹41,533 crore nutrient-based subsidy for phosphatic and potassic fertilisers for the kharif season, covering 28 grades. If output still falls short, the government may need to release buffer stocks and import commodities, widening the current account deficit and putting pressure on the rupee.
