Stories
Weakest Monsoon Since 2015: ICRA Cuts FY27 Farm Growth Forecast to 1%
- •ICRA cut its FY27 agriculture, forestry, and fishing growth forecast to 1% from 1.3% due to the weakest monsoon since 2015, which saw rainfall at 87% of the long-period average.
- •Deficient and uneven rainfall impacted kharif sowing, which was 1.2% below year-earlier levels, and raised concerns for the upcoming rabi season due to depleted reservoir levels, especially in southern and some northern states.
- •The uneven distribution of rainfall, with East and Northeast and South Peninsula regions in deficit, could reduce overall kharif output even where acreage is near normal.
- •Reservoir storage is significantly lower than last year and historical averages, particularly in southern India, threatening rabi sowing of irrigation-intensive crops like rice and wheat.
- •Weaker farm incomes could dampen rural demand in the second half of FY27 and increase food inflation risks, with rural wage growth slowing and real rural wages contracting.
Key Questions Answered
Southwest monsoon rainfall fell to 87 per cent of the long-period average in 2026, which is the lowest level recorded since 2015. Due to these deficient and uneven rains, rating agency ICRA lowered its agriculture, forestry, and fishing growth forecast for FY27 to about 1 per cent from the previous estimate of 1.3 per cent.
Reservoir storage stood at 71 per cent of full capacity as of September 24, 2026, with severe shortfalls across southern and northern India. These significantly depleted reservoir levels raise major concerns over the upcoming rabi sowing season, particularly for irrigation-intensive crops like rice and wheat.
Rural labor conditions improved slightly as the unemployment rate fell to 4.1 per cent in August 2026, but nominal wage growth slowed to a 59-month low of 3.3 per cent in July while real wages contracted by 1.6 per cent year-on-year. ICRA expects rural inflation pressures to rise in the third quarter due to higher food prices and West Asia-related cost pressures.
