The India Meteorological Department (IMD) has projected a below-normal southwest monsoon for 2026, with rainfall estimated at 92% (±5%) of the Long Period Average (LPA), marking the lowest first-stage long-range forecast in at least 25 years. The outlook comes in contrast to the above-normal monsoons recorded in 2024 and 2025, both at 108% of LPA. 

According to Icra, the subdued rainfall outlook coincides with the likely development of El Niño conditions during the monsoon season, which could adversely impact agricultural output regardless of intensity. 

Kharif output, reservoir levels at risk 

The below-normal rainfall is expected to weigh on kharif sowing and agricultural output, while also limiting the replenishment of reservoir storage. As of early April 2026, all-India reservoir levels stood at 47% of live capacity—higher than historical averages—offering some buffer, but insufficient to fully offset weak monsoon conditions. 

ICRA noted that uneven rainfall distribution is likely, with several regions expected to receive below-normal precipitation, though parts of the northeast, northwest and southern peninsula may see normal to above-normal rains. 

Inflation, rural demand outlook under pressure 

A weak monsoon, coupled with potential El Niño conditions, could push food prices higher and drive headline inflation above 4.5% in FY2027, ICRA said. The agency also flagged downside risks to its agri-GVA growth forecast of 3% for the fiscal year. 

While rural demand may remain supported in the near term by healthy rabi harvest cash flows, sentiment is likely to weaken in subsequent quarters due to lower farm output and income uncertainty. 

Fertiliser supply concerns add to headwinds 

The ongoing tensions in West Asia pose additional risks, particularly to fertiliser availability and prices. India’s dependence on imports of key fertilisers such as DAP and MOP leaves it vulnerable to supply disruptions and cost pressures amid geopolitical uncertainties. 

Policy support critical 

Icra stated that calibrated hikes in minimum support prices (MSPs) for kharif crops will be crucial to support farm incomes and rural sentiment, especially as multiple headwinds—including weak rainfall, rising input costs, and geopolitical risks—threaten the agricultural outlook. 

Overall, the monsoon trajectory, evolving climate conditions, and global supply dynamics will remain key determinants of agricultural performance and rural demand in FY27.