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Monsoon passes 2009 level, crop risks remain
The monsoon is coming to a close with a modest temporal deficit better than 2009 levels, while spatial distribution has improved considerably. Sowing has recovered with this, but risks to yields from warm/dry weather do exist. Also, risks to Rabi wheat output exist from low reservoir levels when stocks are middling and global prices are high. Already, we see some food prices (onion, sugar, wheat, edible oils) run considerably above previous year levels. While these are outliers, the low base of last year makes some inflation pickup likely. We continue to see FY27 inflation at 5.2% with pump prices posing upside risk.
Spatial distribution has improved despite an aggregate rainfall shortfall
All-India rainfall is at a deficit of 14.2%, with rains now better than in 2009, but unlikely to rise above 2014. These were El-Nino years and provide a blueprint for agri growth. Even at the end of the season, El Niño trends have not eased. Encouragingly, 52% of districts now have normal or surplus rain, concentrated in central India, important for Kharif crops.
Sowing has normalised, limiting immediate production concerns
The improvement in rainfall has supported kharif sowing activity, with acreage is now comparable to last year, with only mild shortfalls in rice. While this reduces some risks to output, the combination of higher average temperatures and weaker soil moisture adequacy in around half the country suggests that risks to yields of sown crop still might exist. Wheat might be the proximate issue – even though current stockpiles are adequate, an early peak to reservoir levels comparable to 2023 and soil moisture might hurt Rabi output while global prices are high.
Food price pressures are becoming more crop-specific
Recent wholesale price trends show that broad food risks remain contained, but individual commodities warrant close monitoring. Sugar prices have not fallen despite increase in imports, while palm oil prices risen with global trends. Wheat prices have been along seasonal trends, but are well above previous year levels. In vegetables, tomato prices experienced seasonal spikes but have since moderated significantly. At the same time, prices of onions have spiked, while potatoes are low. Despite this, some level of inflation is likely in food given the low base of last year. We continue to see inflation at 5.2% in FY26 with upside risks of a pump price hike.
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