New Delhi, Apr 13 (KNN) India’s rural economy may come under pressure in 2026 due to a possible below-normal monsoon and rising agricultural input costs, according to a report by Systematix Group.
The report warns, “The combination of a likely below-normal 2026 monsoon and elevated agro-input costs due to the US-Iran conflict creates a challenging outlook for agricultural production, rural consumption, and inflation management,” ANI reported.
Monsoon Outlook Raises Concerns
The report projects a below-normal southwest monsoon at around 94 per cent of the long-period average, citing Skymet Weather estimates.
While rainfall during June and July is expected to remain relatively stable, a likely shortfall in August and September could affect crop yields, particularly in northern, western, and central regions of India.
“ENSO-neutral conditions currently prevail and are likely to persist through April-June (80 per cent probability). However, El Nino is expected to emerge during May-July with a 61 per cent probability and persist through the end of 2026, with roughly a 25 per cent chance of it becoming a very strong event,” the report said.
Impact on Agriculture and Rural Demand
A weaker monsoon could adversely affect the kharif crop cycle, which plays a key role in boosting rural incomes and driving demand for sectors such as fast-moving consumer goods, automobiles, two-wheelers, and consumer durables.
The current outlook follows a strong monsoon in 2025 but echoes the disruption seen during the 2023 deficit year, when agricultural output and rural consumption were impacted.
Rising Input Costs Add Pressure
The report highlights that global factors, particularly the US-Iran conflict, are pushing up input costs for farmers.
Disruptions in shipping through the Strait of Hormuz—a key route for fertilisers and raw materials such as ammonia, phosphoric acid, sulphur, and liquefied natural gas—have led to higher global prices.
This is expected to increase the cost burden on farmers and raise subsidy requirements for the government.
Fiscal Implications
Higher fertiliser and food subsidies, along with under-recoveries on petroleum products, could strain public finances. The report estimates that subsidy outgo may rise by Rs 10,000 crore to Rs 25,000 crore in FY27 if global prices remain elevated and monsoon conditions weaken.
(KNN Bureau)
