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Nomura Warns Weak Monsoon Threatens Food Inflation and Rural Demand
M
Moneycontrol•06-10-2026, 11:46
Nomura Warns Weak Monsoon Threatens Food Inflation and Rural Demand
- •Cumulative southwest monsoon rainfall was 13% below normal, marking the worst performance since 2015 with severe deficits in the East, North East, and South.
- •IIT Gandhinagar India Drought Monitor reported that about half of the country faced drought conditions by the end of September.
- •Reservoir levels stood at 72% of full capacity on October 1, raising concerns for Rabi crop production including wheat and pulses.
- •Nomura forecasts food and beverage inflation to surge to 8.5 to 9.0% year-on-year in October and November.
- •The brokerage expects weaker consumption demand after the festive season and anticipates 25 basis point rate hikes by the RBI.
Key Questions Answered
Cumulative southwest monsoon rainfall from June to September was about 13% below normal, marking the worst performance since 2015 and falling short of the India Meteorological Department's projected 10% deficit.
Nomura's production-weighted rainfall analysis indicates that jute output faces the highest risk with a deviation of roughly -26%, followed by coarse cereals and rice with declines around -12% to -13%.
Nomura expects the RBI to execute policy fine-tuning through 25 basis point repo rate hikes in October and December instead of pursuing steep market tightening.
