Amid a global gloom, the rain gods could bring good news for the Indian economy. With the India Meteorological Department (IMD) and Skymet forecasting an above-normal monsoon this year, economists are hopeful that the rains could give India's consumption story a boost.
A durable reduction in food inflation, an uptick in rural demand, and support for economic growth amid external headwinds are the likely outcomes of the above-normal monsoon projected by the IMD in the current financial year, according to economists.
“India’s economy is likely to grow by at least 6.3 percent this fiscal year, supported by an above-normal monsoon and low oil prices,” N R Bhanumurthy, director, Madras School of Economics, told Moneycontrol. The Reserve Bank of India has projected FY26 growth at 6.5 percent while the Economic Survey has pegged it at 6.3-6.8 percent.
The IMD earlier today forecast an above-normal monsoon for 2025 and predicted neutral El Nino conditions.
M Mohapatra, DGM, IMD, said, "The forecast indicates that El Nino-Southern Oscillation (ENSO) conditions are likely to continue during the monsoon season."
Quantitatively, the monsoon rainfall (June-September) over the country as a whole is likely to be 105 percent of the long-period average (LPA), which is 87 cm, with a model error of +/-5 percent, said the weather department in its first estimate for the southwest monsoon.
Positive outlook
Economists said that the IMD and private weather forecaster Skymet are aligned on a positive monsoon outlook, but it remains to be seen how well it is distributed over regions and across seasons. “What we need to monitor is also heatwaves. This is good news, but I think we need to watch out for other risks,” said D K Joshi, chief economist, Crisil.
Joshi said the IMD prediction is positive for the rate cut cycle, as there will be a durable reduction in food inflation. “Normal rainfall is good for rural demand… tariff impact is still evolving and we are trying to do a trade deal with the US. One part that is playing out is uncertainty. In this environment, it is positive news,” he added. Crisil has projected India’s GDP to grow at 6.5 percent in FY26, with a downward bias.
The risks
Aditi Nayar, chief economist, ICRA told Moneycontrol: “An above-normal monsoon that is timely and well distributed should support agri growth and rural demand. However, episodes of concentrated heavy rainfall could pose a risk to crop sowing/growth."
Parts of the country are already battling extreme heat and a significantly high number of heat wave days are expected in the April to June period. This could strain power grids and result in water shortages.
"The agricultural sector, in spite of everything, still depends on a good monsoon for productivity and output. Therefore, the above-normal monsoon forecast is good for growth recovery, especially through increased potential output in the agricultural sector," Lekha Chakraborty, professor at NIPFP, told Moneycontrol.
The monsoon is crucial for India's agriculture sector, which supports the livelihood of about 42.3 percent of the population and contributes 18.2 percent to the country's GDP. About 52 percent of the net cultivated area relies on the primary rain-bearing system. It is also crucial for replenishing reservoirs critical for drinking water, apart from power generation across the country.
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