Weak Monsoon Alert: India’s next inflation threat is coming from the skies. At a time when easing oil prices have offered some relief to broader price pressures, a developing ‘Super El Niño’ now threatens the country’s crucial southwest monsoon and could push up food prices. Because the southwest monsoon accounts for about 70 per cent of India’s annual rainfall and any major deficit poses a direct risk to the $300 billion agricultural sector – potentially triggering food inflation, stifling rural demand, and dragging down overall economic output.
IMD’s prediction for below-normal rainfall
Last month, the India Meteorological Department (IMD) predicted below-normal rainfall over the country during the southwest monsoon season, between June and September.
India’s cumulative rainfall between June 4 and June 28, 2026
- This year: 77.1 mm
- Average: 141.4 mm
- Rainfall Deficit: 45%
A rapidly intensifying Super El Niño has caused India’s weakest monsoon start in ten years, keeping equity markets firmly in a holding pattern. The dry spell directly threatens the 56 per cent of India’s GDP driven by consumer spending.
Below-normal monsoon’s impact on several sectors
A below-normal monsoon, meanwhile, could have far-reaching implications for several sectors of the Indian economy, particularly those with strong rural exposure. However, certain summer consumption sectors could benefit from the situation.
Impact of Below-Normal Monsoon
- Lower kharif sowing
- Lower production of rain-fed crops such as rice, pulses and oilseeds
- Higher inflation (Lower production of crops –> Higher crop prices –> Higher inflation)
- Lower rural demand (Lower production of crops –> Lower rural income —> Lower rural demand)
Meanwhile, the biggest risk stems from lower agricultural output, which could weaken farm incomes, dampen rural consumption and reduce demand across multiple industries. Fertiliser companies, consumer goods manufacturers, tractor and two-wheeler makers and consumer durable firms are among the sectors that could be severely hit if rainfall remains deficient.
Which sectors could take a hit, and which could see demand improve?
A quick look through ET NOW’s sector-wise stock watch
Fertiliser companies may see demand slowdown
Rural-focused FMCG players at risk
Fast-moving consumer goods (FMCG) companies with significant rural exposure may also lead to slower demand growth as lower farm incomes weigh on discretionary and daily household spending.
Tractor sales, which are closely related to farm incomes and agricultural activities, could also come under pressure given the below-normal monsoon scenario.
Manufacturers such as Escorts Kubota, Mahindra & Mahindra’s tractor business, and VST Tillers Tractors may witness weaker demand if lower rainfall impacts crop production and farmers postpone capital expenditure.
Two-wheeler sales could lose momentum
The rural market accounts for a significant share of two-wheeler sales in India. A below-normal monsoon could reduce disposable incomes in agricultural regions, affecting vehicle purchases.
Consumer durable manufacturers may also be impacted
Summer products-making companies may benefit
At a time when several sectors could face challenges due to the deficit rainfall this year, companies benefiting from above-normal temperatures may see improved demand.
Hot beverage companies may witness seasonal pressure
| Sector | Subsector | Companies Impacted | Impact | Rationale |
| Fertiliser | Fertiliser | Coromandel International, Paradeep Phosphates | Negative | Expectations of lower agricultural output –> Lower fertiliser demand |
| FMCG | Day-to-day products | HUL, Dabur, Marico, Godrej Consumer Products | Negative | Lower agricultural output –> Lower rural income –> Lower consumption demand |
| Auto | Tractor | Escorts Kubota, M&M Tractor, VST Tillers Tractors | Negative | Lower agri output –> Lower rural income –> Lower tractor demand |
| Summer Products | Icecreams, dairy drinks, soft drinks | Dodla Dairy, Heritage Foods, Kwality Walls, Varun Beverages | Positive | Below-Normal Monsoon –> Above-normal temperature –> Higher demand for summer products |
| Auto | Two wheelers | Hero, Bajaj Auto, TVS, Eicher | Negative | Lower agri output –> Lower rural income –> Lower 2W demand |
| Consumer Durables | ACs, refrigerators | Voltas, Blue Star, LG Electronics India | Negative | Lower agri output –> Lower rural income –> Lower demand |
| Hot Beverages | Coffee, tea | Nestle, Tata Consumer | Negative | Below Normal Monsoon –> Above normal temperature –> Lower demand for hot products |
Challenges faced by rural farming economy currently
- Higher input costs (especially fertiliser required for farming)
- Prices of key raw materials (ammonia, phosphoric acid, sulphur) have risen
- And now expectations of below-normal 2026 monsoon
A below-normal monsoon does not equally affect all sectors. While agriculture-linked companies and businesses dependent on rural consumption are likely to face headwinds, firms engaged in producing summer-related products may benefit from higher temperatures.
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
