A weak start to the southwest monsoon is emerging as a key risk for India's economy, with below-normal rainfall slowing Kharif sowing, reducing reservoir levels and raising concerns over food inflation, according to a report by brokerage Emkay.
While food prices have remained largely contained so far, the brokerage cautioned that continued rainfall deficiencies across major agricultural regions could impact crop production and put upward pressure on prices in the coming weeks.
Emkay noted that cumulative rainfall as of July 3 was 31% below the long-period average (LPA), despite some improvement over the previous week. Weekly rainfall, as of July 1, was also weak at 29% below the LPA.
The rainfall deficit has been widespread across the country. North and West India have recorded a 21% shortfall, Central India 30%, Southern Peninsula 21%, while East and North-East India have experienced the steepest deficit at 41%.
June was particularly disappointing, ending with rainfall 40% below the long-period average, making it the weakest June for the monsoon in the last decade.
The outlook for July also remains challenging. Emkay highlighted that the India Meteorological Department (IMD) expects rainfall during the month to remain below normal, at less than 94% of the long-period average. Since July is the most crucial month for Kharif crop planting, a prolonged weak monsoon could significantly affect agricultural output.
The delayed arrival and uneven distribution of rainfall have already affected sowing activity.
According to Emkay, total Kharif sowing area stood at 18 million hectares as of June 26, down 23% from the same period last year.
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Most major crops have witnessed lower acreage.
Rice sowing has declined 25% year-on-year to 2.6 million hectares, while pulses are down 30% at 1.5 million hectares. Coarse cereals have fallen 12% to 3.2 million hectares, whereas oilseed sowing has seen the steepest decline, plunging 53% to 1.7 million hectares.
Among commercial crops, cotton sowing has also weakened, falling 35% year-on-year to 3 million hectares.
Overall, only 17% of the normal Kharif area had been sown by late June, compared with 22% at the same stage last year.
The brokerage noted that July typically accounts for *60% to 80% of total Kharif sowing, making an improvement in rainfall during the month essential for ensuring normal crop production.
Despite the weak monsoon, food inflation has remained relatively moderate.
Weekly retail prices increased the most for vegetables, which rose 1.5%, followed by eggs at 1%. Cereals gained 0.5%, spices 0.4%, while pulses, edible oils and milk recorded smaller increases.
On an annual basis, edible oils and fats continue to see the highest inflation at 11%. Eggs are up 6%, while vegetables, milk and spices have risen around 3%. Cereals are up 2% and pulses 1%.
However, Emkay warned that if rainfall remains deficient in key agricultural states such as Maharashtra, Gujarat, Madhya Pradesh and Uttar Pradesh, food supplies could tighten, pushing up prices later in the season.
Adding to the uncertainty are low reservoir levels across the country.
As of July 2, India's reservoirs were filled to just 26% of their total capacity, which is 39% lower than the corresponding period last year.
Central India has the highest storage level at 32% of capacity, followed by North India at 29% and West India at 28%. Reservoir levels remain particularly weak in South India at 20% and East India at just 19%.
Low water storage not only affects irrigation for the current crop season but could also impact drinking water availability and hydroelectric power generation if rainfall does not improve.
Emkay believes the coming weeks will be critical. With July accounting for the bulk of Kharif sowing, a meaningful revival in monsoon activity is necessary to improve crop prospects, replenish reservoirs and keep food inflation under control. Without a sustained pickup in rainfall, concerns over agricultural production and rural demand are likely to intensify.
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