The Finance Ministry’s ‘Monthly Economic Review’ for May highlighted concerns over the potential effects of deficient rainfall caused by the development of El Nino in June. This could lead to rapid impacts on food inflation, rural demand, and overall growth, compounding existing inflationary pressures from high global energy prices. Looking forward, while agricultural prospects for the upcoming kharif season offer some immediate relief, there are also medium-term cautions to consider.
The Economic Review pointed out that despite the positive aspect of well-positioned buffer stocks, there are challenges ahead. As of the end of April 2026, the total stock of rice and wheat held by the Food Corporation of India and state agencies was at 817.53 lakh tonnes. Reservoir storage levels were also favorable, standing at 123.86 per cent of the decadal average, setting a good foundation before the monsoon season.
Moreover, summer crop sowing has seen an increase, with area coverage expanding to 83.08 lakh hectares from 80.01 lakh hectares in the same period last year. However, the India Meteorological Department’s forecast of a potential shift from ENSO-neutral conditions to El Nino during the 2026 monsoon season raises concerns. The overall rainfall is projected to be around 92 per cent of the Long Period Average, with a notable risk of deficient rainfall based on interactions with other climatic factors.
The review also highlighted the historical impact of El Nino on agricultural production. While rice production has shown resilience during strong El Nino years due to better irrigation coverage in key producing states, crops like pulses and oilseeds have faced challenges. Livestock and dairy sectors may also encounter difficulties such as fodder shortages, reduced milk yields, and increased feed costs. Despite these concerns, demand conditions in the economy remain robust, with strong growth seen in domestic automobile sales across various segments.
