With the southwest monsoon arriving early and forecast to be above normal, the Reserve Bank of India (RBI) expects food inflation to ease and agricultural production to improve in 2025–26. In its annual report released on Thursday, the central bank said the favourable rainfall outlook, elevated reservoir levels, and softening global commodity prices bode well for keeping inflation in check.
The India Meteorological Department (IMD) has upgraded its forecast for the 2025 monsoon season, predicting rainfall at 106% of the long-period average (LPA), up from last month’s 105%. June rainfall is expected to be especially strong, averaging over 108% of the norm nationwide.
“The easing of supply chain pressures, softening global prices, and expectations of higher agricultural output, supported by an above-normal southwest monsoon, augur well for the inflation outlook in 2025–26,” the RBI said.
Inflation seen moderating further
Headline inflation, which eased to 4.6% in 2024–25, is projected to moderate further to 4.0% over the next 12 months. The RBI noted that inflation, especially food inflation, had dropped more than expected in early 2025, helped by a strong rabi harvest, record wheat output, and softening international prices.
Retail inflation fell to a six-year low of 3.16% in April, down from 3.34% in March, while food inflation dipped to 1.78%.
However, the central bank cautioned that climate volatility remains a risk, with the increasing frequency of extreme weather events necessitating close monitoring of food prices.
Early monsoon arrival boosts prospects
The southwest monsoon arrived in Kerala on May 24, 2025, eight days ahead of schedule, and reached Mumbai by May 26, a full 16 days earlier than usual. This marks the earliest onset of the monsoon since 2009.
The IMD reported rapid monsoon advancement, with rainfall spreading across southern and northeastern states by May 24 and reaching key cities like Bengaluru and Pune by May 26. By May 28, the rains had moved into Maharashtra, Telangana, ..
While early and intense rainfall can help replenish reservoirs, critical for irrigation, drinking water, and hydropower, the speed and volume of this year's onset raise concerns about potential damage to crops and rural infrastructure. In 2024, reservoirs had already recovered due to above-normal rainfall (108% of LPA), reversing a five-year low caused by a deficit monsoon in 2023.
However, the excessive rainfall in 2025, especially if poorly distributed, could overwhelm fields, delay or damage kharif sowing, and lead to significant crop losses.
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More worryingly, if rains continue with erratic intensity or timing, the impact on agricultural output could be severe, triggering renewed food inflation and even supply shocks. The central bank cautioned that while rainfall is gen ..
Government efforts to support agriculture
The RBI also pointed to government initiatives aimed at improving farm productivity and climate resilience. These include a national mission on high-yielding seeds, enhanced credit under the Kisan Credit Card scheme, and a push for natural and organic farming.
One crore farmers are expected to benefit from the National Mission on Natural Farming, which aims to improve soil health and climate resilience.
Cautious optimism ahead
Despite some disruption in 2024–25 from an extended monsoon that affected mining and dampened electricity demand, the outlook for the year ahead is more favourable. The early onset of the 2025 monsoon is expected to enable timely kharif sowing, especially of crops like rice, maize, and cotton, and support rural incomes.
Still, while abundant rainfall may help improve crop yields, excessive rain or uneven distribution could damage crops or trigger floods.
Source Name : Economic Times