Summer has set in early this year, with heat rising sharply across large parts of the country over recent weeks and conditions already becoming harsh as forecasts point to a weaker monsoon ahead. Several regions have already seen extreme temperatures, with Delhi touching 49.9°C, Chityala in East Godavari district recording 48.3°C, and Mulukuduru in Guntur reaching 47.7°C.
India is heading into the 2026 southwest monsoon season with a higher risk of below-normal rainfall and heatwaves, raising concerns over inflation, farm output and rural demand in the coming months. The India Meteorological Department (IMD) expects monsoon rainfall in 2026 to be around 90% of the Long Period Average (LPA), with a margin of ±4%, meaning actual rainfall could range between 86% and 94% of normal levels. This places the season in the below-normal category, with an estimated 10% rainfall shortfall. The forecast also points to a likely El Niño development during June–September, while neutral Indian Ocean Dipole (IOD) conditions are expected to continue, offering limited support to rainfall.
The IMD has projected monsoon onset over Kerala between 28 May and 3 June, showing that the southwest monsoon is in its advance phase. June 2026 is also expected to see above-normal maximum temperatures across most parts of India. Heatwave conditions are likely to continue over parts of Northwest and Central India, with temperatures expected to stay 2–4°C above normal in North and Northwest India and 1–3°C above normal in West and Central India.
The economy remains highly sensitive to rainfall patterns. India has seen seven El Niño events in the past 25 years, and six of them led to below-normal monsoons, usually with rainfall falling short by 8–10% of the Long Period Average (LPA). Historical data shows that every 1 percentage point drop in rainfall below LPA reduces agricultural GVA growth by about 0.4 percentage points.
These findings are based on HDFC Bank Treasury Macro Research, which uses past monsoon trends and El Niño-linked agricultural and inflation data.
The impact differs across crops. Rain-dependent crops such as bajra, maize and oilseeds (groundnut) are the most at risk. A 1 percentage point fall in rainfall below normal can reduce their production by about 0.9 to 1.6 percentage points. Kharif pulses (tur) are also exposed due to limited irrigation. Maharashtra alone produces nearly 40% of India’s tur but only 14% of its area is irrigated. In comparison, rice is more stable, with nearly 70% irrigation coverage, helping it manage rainfall shortages better.
Rainfall timing is also important. Weak rainfall during June to August can reduce sowing activity. If rains fail later in the season, the impact shifts from lower sowing to lower yields, changing the nature of the loss.
For winter crops, the impact is indirect and depends on water storage levels. As of April 2026, reservoir storage stood at 41% of capacity, the highest for this period since 2022 and above the 30 to 36% range seen in 2024 and 2025, offering some support for rabi sowing. However, past data shows that not every El Niño year leads to weak winter crop output.
Inflation risks are closely linked to rainfall and temperature. During El Niño years (excluding FY19), food inflation has been around 170 basis points higher than in normal monsoon years, though the impact is not uniform across categories.
Milk prices usually rise during El Niño and heatwave years because dairy production falls and fodder costs rise, increasing overall input costs. Vegetables are also highly sensitive, especially onion and tomato. Tomato prices have already increased 34% month on month in May due to heat-related supply disruptions.
Cereal inflation is also affected by global trends. Weak monsoons in India often occur alongside production risks in major rice-producing countries such as Indonesia, Thailand, Vietnam and the Philippines. At the same time, USDA forecasts suggest lower global wheat and rice output in 2026–27, adding pressure on prices worldwide.
Pulses follow a cyclical pattern where higher prices encourage higher production in the next cycle, leading to oversupply and later price declines. With pulses inflation down nearly 10% year on year in FY26, farmers may reduce sowing in the upcoming kharif season.
Input costs are another concern. Although overall fertiliser stocks are adequate, urea and MOP stocks are lower than last year. This could lead to higher costs during sowing and may push farmers toward crops like cotton that require less fertiliser, adding pressure on food inflation.
On consumption, past trends show that El Niño years usually weaken rural demand. This is seen in slower wage growth, higher participation in the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), and weaker tractor sales. Two-wheeler sales are not hit immediately but tend to slow later depending on the severity of income stress.
The broader takeaway is clear. Weather shocks are no longer limited to farming alone. In 2026, a weaker monsoon combined with extreme heat could affect prices, consumption, rural demand, and influence the overall economic outlook for the year.
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