India experienced its fifth driest June since 1901, with rainfall falling 39.8% below the long-term average according to the latest weather department data. The meteorological department has declared that June 5th was the driest day in India since 1901, marking a historic low in monsoon performance. The Indian Meteorological Department (IMD) forecasts that rainfall will remain less than 94% of the long period average, with July expected to see below-normal rains. July's long-term average rainfall from 1971-2020 was 280.4 millimetres, making the current deficit particularly severe. This deficient rainfall is expected to affect most of central, northern and western India, while certain sections of northwest India, east-central India and eastern peninsular region have higher chances of receiving normal and above-normal rains.
El Niño, a climate pattern marked by unusually warm ocean temperatures in the central and eastern Pacific, is developing into a super El Niño that threatens to make the current dry conditions even worse. According to reports from Mint, since agriculture remains a key driver of the Indian economy, rainfall disruption can set off a chain reaction—from lower farm output and higher food prices to inflationary pressures—that can ultimately affect household finances. Madan Sabnavis, chief economist at Bank of Baroda, highlighted that timing and geography drive the initial economic shock, noting that the possibility of El Niño is very high in July-August, which will mean possibly lower rainfall in some parts. He warned that crops like rice and sugarcane need water all through the season and carry some risks, making monitoring the spread and timing of rain important.
The worst of the dry spell has hit central India and the Deccan—an agricultural heartland stretching from Rajasthan, Gujarat, Maharashtra and Karnataka states in west India and through Uttar Pradesh, Madhya Pradesh, Chhattisgarh and Telangana further inland. As reported by Bloomberg, this region accounts for about 90% of India's soya bean and sugarcane crop, 80% of its cotton production and 70% of its peanuts and pulses, such as lentils and chickpeas. The impact is particularly severe in farming districts like Nashik, northeast of Mumbai, which is the heart of India's onion country. Rainfall in Nashik this month has been running at just 16% of the long-term average, with the region being vital for fruits and vegetables that give it an outsized impact on prices across the country. The concern is that over 45% of India's farmland lacks artificial irrigation and relies entirely on seasonal rain, making delayed or weak monsoons particularly disruptive to Kharif crop sowing including rice, pulses, and oilseeds. The sluggish monsoon has already led to the slowing down of planting of summer crops such as rice, corn, cotton and soybeans.
The potential drop in agricultural production can directly drive up retail inflation, which is currently running at its highest levels since early 2025. Research by QuantEco Research indicates that a 10% rain deficit could add as much as one-percentage-point to headline consumer inflation driven by food prices. India's cumulative rainfall was 43% below normal as of June 22, with the Reserve Bank of India closely monitoring the weather to assess inflation outlook. RBI Governor Sanjay Malhotra has highlighted India's stockpile as a potential buffer, while maintaining the key rate at 5.25% with a neutral stance. However, economists caution that stockpiles can only partially offset sustained weather-related production hits, with Sabnavis expecting headline inflation to top 5.5% by October, near the upper ceiling of the central bank's target band. The Indian Council of Agricultural Research (ICAR) is implementing District Contingency Plans, encouraging farmers to switch to short-duration, drought-resistant varieties of millets and pulses, while financial safety nets like the Pradhan Mantri Fasal Bima Yojana (PMFBY) provide critical insurance against weather-induced crop losses.
A below-normal monsoon could have far-reaching implications for several sectors of the Indian economy, particularly those with strong rural exposure. According to ET Now, 56% of India's GDP is driven by consumer spending, making the current dry spell particularly concerning. The biggest risk stems from lower agricultural output, which could weaken farm incomes, dampen rural consumption and reduce demand across multiple industries. Fertiliser companies, consumer goods manufacturers, tractor and two-wheeler makers and consumer durable firms are among the sectors that could be severely hit if rainfall remains deficient. Companies such as Coromandel International and Paradeep Phosphates may face lower sales volumes due to reduced fertiliser demand, while rural-focused FMCG players like Hindustan Unilever, Dabur, Marico and Godrej Consumer Products could see slower demand growth as lower farm incomes weigh on discretionary spending. Tractor sales could also come under pressure, with manufacturers like Escorts Kubota, Mahindra & Mahindra's tractor business, and VST Tillers Tractors witnessing weaker demand if lower rainfall impacts crop production. The northern plains are also facing atypically hot temperatures, with maximum temperatures going past 42 degrees centigrade in select areas, adding to the agricultural stress.
