India may be better prepared than in previous El Niño years to withstand the impact of a below-normal monsoon, aided by stronger reservoir levels, record foodgrain stocks and government contingency measures, but risks to agriculture, rural demand and food inflation remain, says a report by CareEdge Ratings.
The report comes after the India meteorological department (IMD) revised its forecast for the 2026 south-west monsoon, projecting rainfall at 90% of the long period average (LPA), down from an earlier estimate of 92%. The forecast points to a below-normal monsoon, with a significant probability of deficient rainfall across large parts of the country.
According to the CareEdge report, the probability distribution of rainfall is heavily tilted towards weaker precipitation, with an 84% likelihood of sub-normal conditions. The monsoon core zone, which covers much of India's rain-fed agricultural land, is expected to receive below-normal rainfall, raising concerns over crop production and farm incomes.
The rating agency noted that weather indicators also suggest increasing chances of El Niño conditions developing during the monsoon season. Data from the US National Oceanic and Atmospheric Administration (NOAA) indicate a significant possibility of at least a moderate-strength El Niño emerging during the June-September period.
Historically, El Niño events have often coincided with weaker monsoons. Since 1951-52, India has experienced 25 El Niño episodes. Of the 16 instances where El Niño was classified as moderate or stronger, 12 were associated with below-normal or deficient rainfall, highlighting the strong relationship between the phenomenon and monsoon performance.
Agriculture Faces Immediate Risks
The report said the most direct impact of a poor monsoon would be felt in agriculture and rural demand. Lower rainfall could reduce crop output, weaken farm incomes and dampen consumption in rural areas.
CareEdge's analysis shows that agricultural gross value added (GVA) growth has historically been weaker during El Niño years compared with non-El Niño periods. Between 1951-52 and 2024-25, average agricultural GVA growth during El Niño years stood at -1.1%, compared with 4.7% during non-El Niño years. Overall economic growth was also lower during El Niño periods.
However, the report emphasised that the relationship between rainfall and economic growth has weakened considerably over time.
"Agriculture's share in India's GVA has declined from 53.2% in FY1951 to 16.8% in FY2026, while the services sector's contribution has increased substantially," the report noted.
In addition, irrigation coverage has expanded significantly over the decades. Gross irrigated area now accounts for nearly 60% of the gross cropped area, compared with just 17.1% in FY1951-52. The adoption of climate-resilient crop varieties and greater diversification into livestock, fisheries and allied activities have also reduced agriculture's dependence on rainfall.
Nevertheless, agriculture remains India's largest source of employment, accounting for 43% of total employment in 2025. As a result, weather-related disruptions continue to carry significant socio-economic implications.
Food Inflation Could Come under Pressure
Beyond its impact on agricultural output, a weak monsoon could create inflationary pressures through higher food prices.
The report highlighted that El Niño conditions are often associated with heatwaves and abnormal weather patterns that affect perishable commodities such as fruits and vegetables. Tomatoes, onions and potatoes, which have historically contributed to spikes in retail inflation, could face supply disruptions.
Pulses may also be particularly vulnerable. Citing a NITI Aayog study, CareEdge noted that 15 El Niño episodes since 1951 have been associated with declines in pulse acreage and productivity.
The report also warned about imported food inflation. India depends heavily on Malaysia and Indonesia for palm oil imports, and adverse weather conditions in those countries could raise international prices and feed into domestic inflation.
However, CareEdge pointed out that deficient rainfall does not automatically translate into runaway inflation. During the strong El Niño episode of 2015-16, food inflation remained relatively contained due to ample buffer stocks, government interventions and stable global commodity prices.
Strong Reservoir Levels and Food Stocks Provide Cushion
One of the key reasons India is better positioned this year is the relatively comfortable availability of water and food stocks.
As of May 2026, live reservoir storage stood at 30.4% of full reservoir capacity, higher than the average level recorded during recent El Niño years between FY15-16 and FY23-24.
At the same time, wheat and rice stocks held by the government were at record levels as of the end of April 2026.
According to CareEdge, these factors provide a crucial buffer by supporting irrigation needs and helping contain food price pressures if crop production is affected by below-normal rainfall.
The report also highlighted proactive government planning. The Centre has identified 197 vulnerable districts and prepared state-wise contingency plans. Several states have also initiated water conservation, drought preparedness and climate-resilient farming measures ahead of the monsoon season.
State-wise Resilience Varies Widely
While national-level indicators suggest India is reasonably prepared, CareEdge's newly developed state-wise poor monsoon resilience index (SPMRI) reveals significant differences in vulnerability across states.
The index evaluates states using six parameters: irrigation coverage, reservoir levels, dependence of the economy on agriculture, diversification within agriculture, crop patterns and long-term rainfall trends.
According to the index, Odisha, Chhattisgarh, Madhya Pradesh and Uttar Pradesh are among the most vulnerable states to a poor monsoon.
Odisha and Chhattisgarh face relatively low irrigation coverage and high dependence on water-intensive crops. Madhya Pradesh's agricultural sector remains heavily dependent on crop production, while Uttar Pradesh has a crop mix dominated by water-intensive kharif crops despite strong irrigation infrastructure.
On the other hand, Gujarat, Telangana, Haryana and Rajasthan emerged as among the most resilient states.
Gujarat benefits from relatively lower dependence on agriculture and stronger reservoir conditions. Haryana and Telangana have diversified agricultural economies with substantial livestock contributions, while Rajasthan's lower dependence on water-intensive crops and greater diversification within agriculture enhance its resilience.
Interestingly, Punjab, despite having complete irrigation coverage and comfortable reservoir levels, did not rank among the most resilient states due to its heavy dependence on water-intensive crops such as rice.
CareEdge concluded that, while the forecast of below-normal rainfall and the increasing likelihood of El Niño present clear challenges for agriculture, rural demand and food inflation, India is in a stronger position than during many previous El Niño episodes.
Structural changes in the economy, rising irrigation coverage, diversification within agriculture, higher reservoir storage and record foodgrain stocks have collectively strengthened resilience against weather-related shocks.
However, the report cautioned that vulnerability remains uneven across regions, and localised disruptions cannot be ruled out. It said close monitoring of monsoon progress, inflation trends and state-level stress points will be critical in the months ahead.
"On balance, the impact of El Niño may be manageable at the aggregate level, though localised disruptions cannot be ruled out," the report said.
