India’s Monsoon Ends 12.5% Below Normal, Raising Inflation and Rural Risks

India’s Monsoon Ends 12.5% Below Normal, Raising Inflation and Rural Risks

India’s Southwest monsoon season has ended with rainfall 12.5% below normal. The shortfall is wider than the India Meteorological Department’s earlier outlook of a 10% deficit. The dry spell is already weighing on farm output. It has also lowered key reservoirs and raised risks for rural spending in the coming quarters. The open question is how far this feeds into inflation.

Nomura says overall inflation and mid-single-digit price rises still look manageable. The brokerage does not see a clear hit to volumes yet. It warns that further product price increases, plus weaker farm yields, could add pressure on demand.

Large government foodgrain stocks may limit food inflation, Nomura says. Reservoirs in the south and north remain well below normal, which still worries officials about water for the coming Rabi sowing season.

Water in India’s 178 primary reservoirs stood 11.5% below the 10-year average. Live storage was 70.8% of capacity. Total Kharif sowing was down 1.5% year on year by mid-September. That was a recovery from a 23% drop in late June. Rice area fell 3.8%. Maize area fell 2.6%. Pulse area rose 1.5% after better late rain in central belts.

Rural demand is the larger concern. Nomura says rural consumption growth has already slowed and is moving closer to urban rates as weaker yields cut farm incomes. Analysts Mihir P. Shah and Riya Patni said they remain watchful because a below-normal monsoon, El Niño, and company price rises linked to the West Asia conflict can hit together.

Nomura expects strong El Niño conditions to last through February. A warmer winter could follow. That would threaten seasonal goods such as skin creams, lotions, and health supplements.

Nearly 42% of the country’s sub-divisions recorded rainfall deficits. About 75% of Maharashtra and Karnataka faced severe drought conditions. Eastern and North-Eastern India logged the largest shortfall, at 25%. The South Peninsular region was 24% short. Central India limited its deficit to 2%, which cushioned cotton, oilseeds, and pulses. Northwest India recorded a 6% deficit, with only moderate disruption to rice and sugarcane.

Food buffers may hold prices for now. Reservoir stress and a weak Rabi setup could still lift inflation later if yields fall further. These points reflect brokerage and weather assessments. They are not investment advice.