Monsoon revival may ease food inflation, but El Nino remains a threat

Monsoon revival in July offers hope against food inflation, but a Bank of Baroda report flags concerns. Overall rainfall is below average, kharif sowing is down 2.9%, El Nino is a threat, and water reservoir levels are critically low.

A revival in monsoon rainfall and better distribution in the coming weeks could provide some relief to food inflation pressures, but the outlook remains closely tied to rainfall patterns amid concerns over strengthening El Nino conditions, according to a research report by Bank of Baroda.

The report said the second half of the Southwest monsoon will require close monitoring as the India Meteorological Department (IMD) expects rainfall at 94 per cent of the long-period average.

Cumulative Southwest monsoon rainfall between June 1 and July 31, 2026, was 13 per cent below the long-period average (LPA), with total rainfall at 389.8 mm compared with 474.3 mm during the same period last year. However, July witnessed a turnaround, recording rainfall 1 per cent above LPA, after June rainfall was 39 per cent below LPA.

Bank of Baroda said the improvement in rainfall distribution could be positive for food inflation in the near term, although the possibility of moderate El Nino conditions remains a concern. The report noted that 19 of India's 36 meteorological subdivisions received normal to excess rainfall during the period, while 16 states remained in the deficient zone.

Impact on Kharif Sowing

The uneven monsoon has also affected kharif sowing. As of July 31, the total area sown under kharif crops stood at 894.2 lakh hectares, down 2.9 per cent year-on-year from 920.7 lakh hectares last year. The current acreage is equivalent to around 81 per cent of the normal area sown.

Coarse cereals recorded the sharpest decline among major crops, with acreage falling 7.5 per cent, while pulses declined 6.3 per cent and rice sowing fell 2.2 per cent.

Within pulses, moong and arhar sowing declined 9.3 per cent and 9.2 per cent, respectively, although urad acreage rose 10.7 per cent. Some crops recorded an improvement. Oilseed acreage increased 0.7 per cent, sugarcane rose 1.5 per cent and jute and mesta increased 1.9 per cent. Cotton sowing, however, declined 2.4 per cent.

Water Reservoir Levels a Concern

Water availability remains another concern. Reservoir storage across 166 reservoirs stood at 44 per cent of total capacity as of July 30, significantly below 67.9 per cent recorded during the same period last year. Among regions, Western reservoirs had the highest storage at 62 per cent, while the Southern region recorded the lowest at 34 per cent.

The report said the revival in July rainfall offers some optimism, but the trajectory of the monsoon, kharif acreage and reservoir levels will remain critical factors for agricultural output and food inflation in the months ahead. (ANI)

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