Weak Monsoon, El Niño Risks May Weigh On Agriculture & Farm Output In FY27: ICRA

New Delhi, Apr 15 (KNN) India’s agriculture sector may face a challenging year ahead amid concerns over weak monsoon, potential El Niño conditions and fertiliser supply disruptions linked to geopolitical tensions, according to a report by ICRA.

The India Meteorological Department (IMD), in its first long-range forecast (LRF) for the 2026 Southwest Monsoon, has projected rainfall at 92 per cent (±5 per cent) of the Long Period Average (LPA), indicating a below-normal season. 

ICRA noted that this is the lowest initial forecast in at least 25 years, compared to a 93–106 per cent range in previous years.

This marks a reversal from the past two years, when monsoon rainfall was above normal.

Impact on Kharif Crops and Farm Incomes

Below-normal rainfall is expected to affect kharif crop sowing, which depends heavily on monsoon rains between June and September. ICRA warned, "Sub-par rainfall is expected to weigh on sowing of kharif crops, and consequently, agricultural output, farm cash flows and food prices."

Lower rainfall may also limit reservoir replenishment, which is crucial for irrigation, particularly as water levels typically dip before the monsoon.

El Niño Adds to Uncertainty

Global weather agencies have indicated a 62 per cent probability of El Niño developing between June and August 2026. Such conditions are generally associated with weaker monsoon rainfall in India.

ICRA said, "Regardless of intensity level, the materialisation of El Nino could weigh on the rainfall during Southwest Monsoon season in India, posing risks to crop yields and output." 

Fertiliser Supply Risks Emerge

The report also flagged concerns over fertiliser availability for the upcoming kharif season, citing potential disruptions due to the ongoing West Asia conflict. Supply chain constraints could affect both raw materials and finished products, posing challenges for domestic production and requiring alternative sourcing.

Growth and Inflation Risks

ICRA has highlighted downside risks to its FY2027 agriculture Gross Value Added (GVA) growth forecast of 3 per cent. At the same time, it expects consumer price inflation to rise above 4.5 per cent, driven largely by potential increases in food prices.

While rural demand may remain supported in the first quarter due to rabi harvest incomes, the outlook for the rest of the year will depend on monsoon performance.

Reservoir Levels Offer Partial Cushion

Despite the risks, higher reservoir storage provides some support. As of early April 2026, all-India reservoir levels stood at 47 per cent of live capacity, compared to 40 per cent a year earlier and a 10-year average of 37 per cent.

ICRA noted that storage levels are above historical averages in most regions, offering a buffer against potential rainfall shortfalls, although parts of eastern and southern India remain below trend.

Policy Support Key to Farm Sentiment

The report emphasised the importance of reasonable increases in minimum support prices (MSPs) for kharif crops to sustain farmer sentiment.

It added that even if overall rainfall is below normal, a well-distributed monsoon could help mitigate the adverse impact on agriculture.

Outlook Hinges on Monsoon and Geopolitics

ICRA cautioned that a combination of weak rainfall, El Niño conditions and fertiliser supply disruptions could pose significant risks to agricultural output, food inflation and rural demand in FY2027.

The extent of the impact will largely depend on monsoon progression and geopolitical developments in the months ahead.

(KNN Bureau)