It is that time of the year when the chatter across the corporate corridors and the economic chambers veers towards that one most important factor – Monsoon. Will it be on time? Will it be adequate? After two years of above-normal rainfall, this year is setting up to be slightly challenging. The concern is how that would impact inflation, especially when the country is also tackling an Oil shock as a result of geopolitical tension.
IMD issues lowest first forecast for monsoon in 25 years
Earlier this month, the India Meteorological Department (IMD) released its first long-range forecast for the southwest monsoon season for June to September, and the number was hardly comforting. At 92% of the long-period average, the forecast points to a “below-normal” monsoon this year.
More strikingly, the 92% prediction is the lowest first forecast the IMD has issued in at least 25 years. In the entire range of early forecasts going back that far, the number typically hovers around 93%.
It is worth noting here that although India hasn’t seen a situation this bad, the closest to this was in 2023, when the challenges that the country faced, in terms of weather and its impact, were similar.
Inflation and weather impact: What 2023 actually looked like
In 2023, the IMD’s April forecast had pegged monsoon rainfall at 96% of LPA, technically still in the normal range, though on the lower end of it. By the time the season ended, actual rainfall came in at 94% of LPA.
That year, El Niño was the ‘villain’ lurking in the background exactly as it is now. The IMD’s own climate models had flagged the likelihood of El Niño developing during the 2023 monsoon season, and it did. The impact on food prices was tangible.
The ICRA report from May 2023 projected that inflation would soften to around 4.5% in the first quarter of FY24, partly because of a high base from the previous year. But the report was explicit about the risk: a sub-par monsoon in the coming months could affect kharif crop yields and winter sowing, thereby pushing food inflation back up in the second half of FY24.
“Foodgrain output (across the kharif and rabi season) had witnessed a muted growth in 2023-24, while oilseeds output had declined during the year, owing to the sub-par monsoons. While reservoir levels are slightly better currently vis-à-vis the corresponding period levels in 2023, the extent of the drawdown in the summers will determine water availability and the degree of insurance that this would offer once the sowing for kharif crops begins in June 2026,” Aditi Nayar, Chief Economist, ICRA, told Financialexpress.com.
On the ground, the 2023 report tracked retail price movements closely. In May 2023, the price of tomatoes had risen sharply, up 24% month-on-month compared to May 2022 levels. Onion prices had swung by 61.5% on a year-on-year basis in May 2022, a base effect that was still distorting comparisons. Vegetables and perishables were clearly the most volatile category, as they always are when rains falter.
Kharif sowing that year was already showing strain even before the season properly began, the report said. As of mid-May 2023, the cumulative area under summer crops had fallen 2.7% year-on-year. Rice acreage was down 7.3%, and oilseeds had dropped 7.6%, the report noted. The report further mentioned that the monsoon-dependent, non-irrigated farmland, which accounts for roughly 49% of India’s net sown area, was particularly exposed.
2026: A harder starting point, and a more complicated threat
Fast forward to 2026, the report by ICRA noted that India’s reservoirs are in better shape than they were going into the 2023 season. As of April 2, 2026, all-India reservoir storage stood at 47% of live capacity at Full Reservoir Level, well above the year-ago level of 40% and comfortably above the 10-year historical average of 37%. Every region except southern India was above its year-ago level, with northern India particularly strong, running 21 percentage points above where it was in April 2025.
This matters because reservoirs act as a buffer. When the monsoon arrives late or stays thin, stored water keeps irrigation going and delays, though it cannot prevent, the worst of the damage to crops.
One major differentiator between the two years is that the El Niño signal is stronger and earlier, the report noted. Global meteorological agencies have forecast a potentially strong El Niño developing during June to August 2026, with the probability of such an event as high as 62%.
“El Niño years don’t necessarily imply that food inflation will pickup. If the deficit is less than 10% and rainfall activity isn’t impacted in key sowing months of July and August, then food grain production impact would be limited. The link between monsoon outcome and food inflation has weakened over the last few years, due to better supply management as well as adequate buffer stock,” Gaura Sengupta, Chief Economist, IDFC First Bank, told Financialexpress.com.
ICRA’s own analysis of the last 24 years is sobering; every single El Niño year, regardless of whether the event was weak, moderate, or severe, produced a deficit in southwest monsoon rainfall relative to the LPA. The rainfall shortfall in those years ranged from 1% to as much as 22% below normal. Kharif output, the harvest that depends most directly on the southwest monsoon, fell in every one of those eight El Niño years, declining anywhere between 1.6% and 23.3% year-on-year.
Rabi output, which covers winter crops like wheat, contracted in four of those eight years.
2026 Monsoon prediction: What it means for your grocery basket
This is where the 2026 story gets directly personal for consumers. The crops most at risk from a below-normal monsoon are the ones that fill the most space in an Indian kitchen: rice, pulses, oilseeds, vegetables and other kharif produce. These are also historically the most price-volatile items in the CPI food basket.
Right now, the agricultural base going into this monsoon season is actually healthy. As per the report, rabi output has risen across nearly all major crops, wheat is up 1.9%, coarse cereals up 7.5%, pulses up 6.6%, and oilseeds up 6%. On the kharif side, rice and coarse cereals also recorded gains in 2025-26. Sugarcane output jumped 10% year-on-year.
But that advantage is time-limited. If the monsoon disappoints as the IMD is forecasting, kharif sowing will be affected first. Less rain means fewer farmers risk planting, and those who do plant face lower yields. The impact on food prices typically shows up with a lag of a few months, becoming most visible in the second half of the fiscal year, when kharif-linked commodities hit the market and come up short.
ICRA has projected that CPI inflation for FY2027 will exceed 4.5%, partly on account of the monsoon forecast. Compare this to 2023, when food inflation was running near 5.8% even before the kharif damage fully registered, and when ICRA’s projection for the full year was around 5.3% for overall CPI.
2026 Vs 2023: The fertiliser wildcard
There is one risk in 2026 that did not exist in the same form in 2023: the West Asia conflict and its fallout on fertiliser supply.
The report noted that India imports a significant portion of its fertilisers. Di-Ammonium Phosphate (DAP), a key input for kharif crops, is 56% import-dependent. Muriate of Potassium (MOP) is entirely imported, 100% of requirements come from outside India. Even urea, where 75% of demand is met domestically, relies on imported liquefied natural gas to run domestic manufacturing plants.
The conflict in West Asia has disrupted supply chains and pushed up input costs. DAP is the most exposed, given how heavily India depends on imports for it. The government’s ability to source fertilisers at reasonable prices and ensure they reach farmers before the kharif sowing season begins will be a critical variable, which wasn’t the case in 2023.
The bottom line
The 2026 monsoon is shaping up as a more severe version of that challenge. The IMD’s forecast is lower than anything it issued in the previous 25 years of first forecasts, the El Niño probability is higher, and the fertiliser supply chain faces new geopolitical pressures.
The report also highlighted the positive aspects, such as strong buffer levels and a healthy agricultural base. But ICRA has already flagged downside risks to its FY2027 agricultural GVA growth forecast of 3.0%, which was itself based on the assumption of a normal monsoon. If the rains disappoint as forecast, and especially if El Niño intensifies in the second half of the year, the pressure on food prices, such as vegetables, pulses, and oilseeds, will be difficult to contain.