The 'little boy' in the Pacific, India's monsoon and the big test ahead

One of India's biggest uncertainties this year may not lie in global shipping lanes or geopolitical conflicts; it may arrive with a delayed monsoon.

The southwest monsoon has made a sluggish start, with the all-India rainfall deficit widening through June and raising fresh concerns over food inflation and agricultural exports.
"With a tardy progress of the monsoons, the rainfall deficit stands at a steep 40% at the all-India level towards the end of June 2026. Reservoir storage has also dipped below year-ago levels in the Eastern, Western and Southern regions," said Aditi Nayar, Chief Economist at ICRA.

Testing India's farm economy

The southwest monsoon, which normally arrives in June, forms the backbone of India's agricultural calendar. Kharif crops such as rice, cotton and millet depend on timely rainfall for sowing. After a sluggish start to the season, the India Meteorological Department (IMD) has forecasted that July rainfall is most likely to be below normal, at less than 94% of the Long Period Average (LPA).

The impact is already beginning to show in government data, according to a report by The Economic Times. Sowing of kharif crops stood at nearly 18.27 million hectares till June 25, down 22.73% from a year earlier, indicating delayed planting across several states. Paddy acreage fell 25.17% to 2.57 million hectares, while pulses sowing declined 30.48% to 1.49 million hectares. Oilseed acreage recorded the steepest fall, plunging 53.34% to 1.69 million hectares despite the government's continued push to expand domestic production. Even millets, promoted as climate-resilient crops because of their lower water requirement, saw acreage decline 11.73%, according to the report.

While the sharp decline in acreage has raised concerns, economists caution that June typically accounts for a smaller share of total kharif sowing and the coming days will be more vital.

"Crop sowing is trailing the June 2025 levels, but this tends to be a smaller month on average for crop coverage. We will be very watchful of how quickly the monsoons cover the rest of India, and to what extent the rainfall deficit narrows after that," Nayar said.

"July tends to be the most critical month for sowing, and healthy rains during July-August are key to support yields,” she added.

According to a Bloomberg report, the worst of the dry spell has hit central India and the Deccan plateau, stretching from Rajasthan, Gujarat, Maharashtra and Karnataka to Uttar Pradesh, Madhya Pradesh, Chhattisgarh and Telangana. The region accounts for about 90% of India's soybean and sugarcane production, 80% of cotton output and nearly 70% of peanuts and pulses, the report said.

El Niño adds to the uncertainty

El Niño — Spanish for "the little boy", a climate pattern marked by unusually warm sea surface temperatures in the central and eastern equatorial Pacific Ocean — has emerged as another source of uncertainty.

According to IMD, “Weak El Niño conditions are currently prevailing over the equatorial Pacific Ocean. The latest forecasts from the Monsoon Mission Climate Forecast System (MMCFS) and other global climate models indicate that El Nino conditions are likely to strengthen further during the Southwest Monsoon season.”

The outlook for the rest of the monsoon season will now be crucial in determining whether the current sowing delays translate into lower crop output. According to another Bloomberg report, while El Niño is unlikely to be the primary reason behind the delayed onset of this year's southwest monsoon, the climate pattern could weigh on rainfall in the months ahead.

"The impact of monsoon deficiency has become increasingly concentrated," said Maulik Patel, Head of Research at Equirus Securities.

He added that while earlier El Niño episodes in FY03 and FY10 resulted in average kharif output losses of 17%, the four most recent episodes saw a much smaller average decline of 1.4%, reflecting gains from irrigation, procurement and Minimum Support Price (MSP) support.

However, Patel cautioned that oilseeds, pulses and cotton remain significantly more exposed than cereals, making rainfall in Rajasthan, Gujarat, Maharashtra and Madhya Pradesh more critical than the national monsoon average.

Inflation challenge

The monsoon's progress is being closely watched for its potential implications for inflation.
Retail inflation had edged up to 3.93% in May from 3.48% in April, while food inflation accelerated to 4.78% from 4.2%. Even so, headline inflation remained below the Reserve Bank of India's 4% medium-term target for the 16th consecutive month.
The RBI however had flagged weather conditions as a risk to the economic outlook in its June 5 monetary policy statement.

Nayar said food inflation remains the biggest domestic concern if rainfall continues to underperform, particularly for rain-dependent crops and perishables. However, she noted that one mitigating factor is the recent correction in global crude oil prices, which could ease transportation and input costs. "While food inflation remains a concern, for rain-dependent crops and perishables, the recent cooling in crude oil prices provides some relief," she said.

Beyond the domestic outlook, economists say El Niño could also influence global food prices.

Sushanta Mahapatra, Economist at the ICFAI School of Social Sciences, Hyderabad, said El Niño typically acts as a global supply shock by reducing agricultural output across Asia, Latin America and parts of Africa, pushing up prices of climate-sensitive commodities such as rice, sugar, edible oils, coffee and cocoa.

Citing IMF research, he noted that a typical El Niño event raises global non-fuel commodity prices by about 5.3% within a year and adds around 0.6 percentage points to India's inflation, largely through higher food prices.

Impact on agri exports, imports

Beyond farms and inflation, a weak monsoon could also weigh on India's agricultural exports. "A weak monsoon squeezes crop output which leads to lower exports organically or through the government's moves to restrict exports to secure domestic food availability," Patel said.

According to Mahapatra, “The trade implications are most visible in agriculture.”

Citing a 2022 Department of Agriculture & Farmers Welfare report, he said that around 51% of India’s net sown area is rain-fed, making output highly dependent on monsoon rainfall. He added that in past El Niño years—including 1997–98, 2002, 2009, 2015–16 and 2023—weaker monsoon conditions were linked to lower production of key rain-fed crops such as rice, pulses, oilseeds and cotton, reducing exportable surpluses and tightening domestic supplies.

Mahapatra noted that India has imposed export restrictions on wheat (2022), non-basmati rice (2023) and sugar to ensure domestic availability and moderate food inflation, though these decisions reflected a combination of domestic supply conditions, global prices and food security considerations rather than El Niño alone.

According to the World Bank’s Commodity Markets Outlook 2023 report, “India accounts for about 40% of global rice exports… Rice prices soared by 18% in Q32023, reflecting export bans and other trade restrictions on rice from India, which overtook Thailand to become the world’s largest rice exporter in 2011. India banned exports of non-basmati rice in response to increased domestic prices (due to flooding in northern India) and fears of potential El Niño impacts in crucial ricegrowing areas.”

“Sugar exports are similarly exposed,” Mahapatra said and tea, coffee and marine exports also remain vulnerable to climate-related disruptions.

Imports could also face pressure. Citi Research has warned that global agricultural prices face significant upside risks over the next six to twelve months because of worsening El Niño conditions. The assessment also factored in potential disruptions in the Strait of Hormuz during the recent West Asia tensions.

“India met only 43.74% of its domestic edible oil demand through local production in 2023-24, while 56.25% was met through imports, leaving the country exposed to supply disruptions and price spikes, triggered by climate disruptions like El Nino, in major producing nations such as Indonesia, Malaysia, Argentina and Brazil,” said Mahapatra.

The contingency plan

With the possibility of the El Niño phenomenon getting stronger and a weak or uncertain monsoon, the Centre has stepped up contingency measures to minimise risks to agriculture and food security.

According to a PIB statement issued after Agriculture Minister Shivraj Singh Chouhan's review meeting in late June, the Centre has activated a special contingency plan for 315 rainfall-vulnerable districts. Farmers have been advised to delay sowing until cumulative rainfall reaches 75-100 mm, as isolated showers may not provide adequate soil moisture for successful germination. The plan also includes short-duration crop varieties, alternative cropping patterns and water conservation interventions.

Chouhan also said that secretary-level reviews were being conducted every week.

The evolving weather outlook is also changing how businesses approach climate risk. According to Mahapatra, exporters of agricultural commodities are increasingly relying on seasonal forecasts from the IMD, while food processors and trading companies are strengthening contract farming, warehouse infrastructure and diversified sourcing to reduce climate-related disruptions. At the policy level, initiatives such as the National Mission on Edible Oils–Oil Palm (NMEO-OP) and investments in climate-resilient agriculture are aimed at reducing import dependence and strengthening supply resilience.

For now, however, much depends on what happens over the next few weeks. June may have delivered a weak start, but as economists point out, it is the rainfall through July and August, specifically considering the effects of El Nino, that will ultimately determine whether this year's delayed monsoon becomes a temporary setback or a broader challenge for India's farm economy.