The Southwest monsoon ended on a weak and highly uneven note in Aug-26, with cumulative Jun-Aug rainfall deficiency at 14% below normal
Download ReportQuantEco Research | India Monsoon Update - Rainfall deficiency deepens, Sept recovery elusive
The Southwest monsoon ended on a weak and highly uneven note in Aug-26, with cumulative Jun-Aug rainfall deficiency at 14% below normal, raising concerns over Kharif yields despite relatively resilient sowing. Persistently strong El Niño conditions, below-normal reservoir storage and the prospect of a warmer winter also cloud the outlook for Rabi crops, although a potential shift towards positive IOD conditions could provide partial mitigation. With IMD forecast for Sep-26 rainfall at <91% of LPA, the full-season shortfall could settle around 13%, implying downside risks to agricultural GVA, which we estimate could remain subdued in the 0-1% range in FY27 (down from 3.4% in FY26). The weaker agricultural outlook is likely to weigh on rural discretionary demand, while the asymmetric sensitivity of food inflation to rainfall shocks, alongside higher fuel and input costs, poses upside risks to inflation. We therefore retain our FY27 CPI inflation forecast at 5.1%, assuming crude price to average between USD 80-85 pb for the fiscal.