The report noted, with June rainfall estimated at 40 per cent below normal and the India Meteorological Department (IMD) forecasting another below-normal month in July, a deficient monsoon could hurt agricultural output, weaken rural sentiment and eventually slow FMCG volume growth.
“A weak monsoon could hurt agri output, dent rural sentiment and, with a lag, rural consumption” the report said.
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The report highlighted that India’s southwest monsoon, which runs from June to September, contributes nearly 80 per cent of the country’s annual rainfall and coincides with the crucial Kharif cropping season. It plays a vital role in the cultivation of key crops such as rice, pulses, oilseeds, cotton and sugarcane, making a healthy monsoon essential for farm output, rural incomes and the broader agricultural economy.
It further noted, a deficient monsoon could weigh on the FMCG sector through multiple channels. Initially, weak monsoon expectations will likely prompt trade inventory destocking and softening demand. Additionally, over the next one to two months, lower crop output could drive food inflation higher, reducing households’ discretionary spending as they prioritise essential purchases.
Subsequently, weaker Kharif production could hurt farm incomes, particularly in rain-fed regions, with the impact becoming more visible after two to three months and weighing further on rural consumption. The report cautioned that while a strong El Nino remains a key risk for the sector, the full impact of a deficient monsoon, if it materialises, is likely to be visible only towards the end of the calendar year.In a related report, it noted that the potential impact of El Nino on rural demand in 2026 could be less severe than during previous episodes in 2015-16 and 2023, owing to several mitigating factors. Farm incomes have remained healthy following two consecutive years of good monsoons and higher minimum support prices (MSPs) for crops.
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Increased irrigation coverage, now around 60 per cent compared with 49 per cent in FY16, has also reduced agriculture’s dependence on rainfall in many key regions. In addition, reservoir levels are about 19 per cent above the long-term average, providing a buffer against rainfall shortfalls.
“Nonetheless, we believe full impact of a deficient monsoon, if any, would be seen only towards the end of calendar year,” it said.