Weak monsoon may drag agri GDP into contraction

Economists anticipate agricultural GDP to remain flat or contract slightly in 2026-27 amid growing concerns about El Nino. Farmers have already planned to reduce the area under water-intensive, high-paying crops to those that demand comparatively less water but have lower returns such as bajra, jowar, and moong, experts said.

“The agri-GDP growth is likely to be almost zero or even negative depending upon the spatial and temporal spread of rains,” said Ashok Gulati, distinguished professor at the Indian Council for Research on International Economic Relations and former chairman of the Commission on Agricultural Costs and Prices. "Given that IMD has forecast a strong El Nino and rainfall is likely to be 90% of Long Period Average, it is going to be a pretty bad year for agriculture, and of course, farmers that derive much of their income from agriculture," said Gulati.

Gulati is worried about 2026 emerging as a near-drought year. “This will surely hit farmers' income adversely and thus send a dampening effect to the overall economy.” The rural economy is a vital driver of consumption, accounting for 30-40% of sales for most consumer goods.


The projected 94% rainfall in the core monsoon zone will expose crops such as soybean, tur, urad, and cotton to significant moisture stress, said Ashok Dalwai, former chairman of the Committee on Doubling Farmers' Income and presently chairman of the Karnataka Agricultural Price Commission.

"Prolonged dry spells can directly reduce yields and farm incomes,” he said. “Higher fuel costs are increasing the operational expenses of land preparation, mechanised farm operations, and irrigation pump sets powered by diesel.”

Gulati believes an increase in Consumer Price Index inflation is inevitable. "The production of pulses, oilseeds, cotton, millet, vegetables is likely to be hit adversely, and their prices are going to rise,” he said. “I would expect food inflation to rise and so would be overall CPI inflation going above 5%, almost hitting 6% by October-November.”

Rising cost of fertilisers, pesticides, and other inputs is also likely to weigh on farmer incomes.

Amid the shortage, farmers are paying more to buy fertilisers in the grey market, while the price of diesel used in tractors has also gone up due to the supply disruptions triggered by the US-Israel was against Iran. They are also anticipating a significant impact on harvest due to lack of moisture in the second half of the June-September monsoon season.

Rahul Pawar, a farmer from Bhandgaon in western Maharashtra, known for optimising his farm income with modern farming techniques and market research, has decided to cut sugarcane area by 60% fearing unavailability of canal water, and diverted to short-duration crops like bajra and vegetables that need less water.

“I am reducing the area under sugarcane as my fields are dependent on canal water for irrigation,” he said. “As the reservoirs will not fill up due to deficit rainfall, I will not be able to get enough water for sugarcane.”

In Rajasthan, farmers are planning to slash the area under paddy and soyabean. "Although people are aware of El Nino, they are not alarmed like in the past, when irrigation was negligible,” said Rampal Jat from Rajasthan, national president of the Kisan Maha Panchayat. “However, their incomes are going to fall. They are forced to buy fertilisers in the grey market, where prices are almost double. Shifting from high paying crops like soybean, which needs more water than bajra, will reduce their incomes.”

Ganesh Adatrao, a farmer from Osmanabad in drought-prone Marathwada region of Maharashtra—part of the monsoon core zone where rainfall is expected to be below normal—is worried that fertiliser shortages during sowing period may hit soyabean output, crimping his income.

While input costs have risen this year, farmers aren’t confident about getting higher prices due to government efforts to curb any sharp rise in food prices in a bid to control retail inflation.

"The prices of agricultural crops are no longer dictated by demand and supply,” said Anil Ghanwat, a prominent leader of Maharashtra-based farmers’ union, Shetkari Sanghatana. “A fall in production and resultant supply shortages are not likely to result in higher prices for the farmers as the government controls prices for the consumers.”

Companies tracking kharif output are also worried about the production prospects of crops like pulses, paddy, soyabean, and cotton. “We will see some amount of crisis in production,” said Angshu Mallick, executive vice chairman at AWL Agri Business. “We are worried as grain formation happens about one month before the harvest, while the last 20 days of the standing crop are very important for good output.”

Experts suggested the need for government measures to stabilise rural incomes as lower agricultural activity would crimp demand even for farm labour. "The super El Nino is expected to last till January 2027, implying that both Rabi and Zaid crops, short-season summer crops grown between the Rabi (winter) and Kharif (monsoon) seasons, spanning in March to June, will also be negatively affected,” said Dalwai. “Therefore, advance preparation must be made to minimise production loss and income drops.”