A developing El Niño and erratic monsoon rainfall are reviving questions over PMFBY enrolment, state participation and a reform cycle now pushed to next year. According to reports from Mint, Agriculture Insurance Co. of India Ltd. (AIC) chairman and managing director Lavanya R. Mundayur said it is too early to predict whether more farmers will buy cover as sowing decisions and rainfall patterns are still evolving across states. The uncertainty comes as India's southwest monsoon faces a difficult season, with the country running a rainfall deficit so far, while the India Meteorological Department's monthly outlook forecasts below-normal rainfall in July, at less than 94% of the long-period average. Latest reports from The Economic Times confirm that India's monsoon has weakened, increasing the rainfall deficit to eighteen percent, with subdued rainfall forecast for northwest, west-central, and southern India.
June was India's driest in more than a decade and the fifth-driest since records began in 1901, with monsoon rainfall 39.8% below normal last month. As reported by Mint, Brajesh Singh, director of ICAR-CPRI, noted that with rainfall remaining below normal in several parts of the country, more farmers are expected to enrol under PMFBY to safeguard against potential crop losses. The problem for farmers extends beyond quantity to volatility of timing and distribution, which affects both kharif and rabi crops and influences production, prices, inflation, and consumption. Erratic rainfall often results in either drought or waterlogging at critical crop growth stages. Latest data from The Economic Times shows kharif crop sowing is 16 percent lower this season, attributed to weak monsoon and El Niño effects, with area under pulses and coarse cereals showing significant decline.
India's retail inflation reached 4.38 percent in June, exceeding the central bank's target, driven by elevated food and fuel prices. As reported by The Economic Times, retail prices are rising due to reduced sowing of key kharif crops, with inflation increasing for rice, oilseeds, and major pulses. Traders are holding produce, limiting supply and pushing prices higher, with below normal rainfall further exacerbating concerns about future availability. The Reserve Bank of India maintained its benchmark repo rate at 5.25 percent during its review, with economists expecting the central bank to maintain rates while watching for broader price pressures. India's vulnerability to imported inflation is diminishing as global conditions improve, though renewed tensions in the Strait of Hormuz may increase oil prices.
The risks expose a structural weakness in PMFBY's voluntary nature for state governments, which allows adverse selection and leaves the programme with higher concentration of risky regions. According to Mint reports, Mundayur argues that allowing states to opt out creates adverse selection, leaving the programme with a higher concentration of risky regions. India's diverse agro-climatic conditions should spread insurance risk across crops and geographies, but this advantage is diluted when states stay out. Both deficient and excessive rainfall can cause severe damage, with last year's excessive rainfall leading to substantial crop losses in states including Punjab and Maharashtra.
The programme's planned overhaul has been pushed back significantly. As reported by Mint, Mundayur confirmed that this year (FY27) was initially expected to mark the beginning of a fresh three-year tender cycle after the previous round started in 2023. Instead, most participating states have opted to extend existing contracts or issue one-year tenders under the current framework. The next full three-year tender cycle is now likely to begin next year, pushing back proposed changes aimed at making PMFBY more attractive to farmers and states.
