IMD Monsoon Forecast 2026: 90% LPA, inflation watch

Forecast cut puts the monsoon back in focus

India is entering the 2026 southwest monsoon with weaker rainfall prospects after the India Meteorological Department (IMD) trimmed its outlook and increased the probability of deficient rains. The latest forecast, released on May 29, pegs June to September rainfall at 90% of the long period average (LPA), a downgrade from 92% projected in April. Economists tracking the update say the bigger macro risk may come through food inflation and rural demand, not necessarily through a broad hit to GDP. The context is also more complex this year as India is dealing with energy disruptions linked to the West Asia crisis. That combination, economists argue, can raise farm input costs even before rainfall outcomes are known.

What IMD said: lower rains, wider risk bands

IMD has confirmed a ‘below normal’ monsoon for 2026 and signalled a higher probability of a ‘deficient’ season, commonly associated with drought conditions. The department put the probability of deficient rainfall at 60%, defined as rainfall below 90% of LPA. The seasonal forecast also carries a stated model error of ±4%, which implies that the outcome could still vary around the 90% central estimate. Officials also indicated that drought outcomes depend on multiple factors beyond the all-India average, including how rainfall is distributed across crop belts. In addition to rainfall, economists flagged that the persistence of heatwave conditions could further dampen food production in parts of the country.

Regional distribution matters more than the headline

A recurring point in economists’ commentary is that the spatial distribution of rainfall is more critical than the aggregate monsoon number. The latest discussion around the forecast highlights risks for northwest, central, and southern regions if deficient conditions become concentrated there. At the same time, officials indicated some areas such as parts of northwest India including Jammu and Kashmir, Ladakh, Himachal Pradesh, and the northeastern states may see different probabilities than the all-India picture. For markets, this matters because a concentrated deficit in key kharif-producing belts can change the inflation outcome even if the national deviation looks modest. The emphasis, therefore, shifts from a single percentage to where and when rain falls.

Why the GDP hit may be limited despite weaker rains

ET Intelligence Group analysis points to a weakening link between rainfall and overall economic output over the past two decades. It found that the correlation between rainfall departure from LPA and agriculture GVA has remained negligible, under 0.05, over the past 25 years. The correlation between rainfall and GDP growth is also low, at around 0.07, based on the same analysis. This suggests that India’s economy may be less mechanically tied to monsoon outcomes than in earlier decades. However, economists still warn that a deficit can influence food output and rural incomes, which can then spill into consumption-sensitive sectors.

Inflation is the first macro channel investors are watching

Economists cited in the reports warn that a rain deficit could push inflation to over 5% from current levels around 3.4% to 3.48%. CPI-based inflation rose to 3.4% in March 2026, up from 3.21% in February, marking a third consecutive monthly increase under the revised 2024 base year series. ICICI Bank economists also expect headline inflation to be over 5%, driven by higher food and energy prices. The Reserve Bank of India, in an April 8 report, flagged that weak monsoon conditions alongside elevated energy prices from the West Asia conflict pose upside risks to inflation. RBI has projected retail inflation at 4.6% for FY27, a baseline that could be tested if food prices re-accelerate.

Farm output and commodities: uneven impact likely

The likely inflation transmission is expected to be uneven across commodities and regions. ETIG noted that some agri commodities such as oilseeds may be affected, even if the broad agriculture GVA effect remains limited in aggregate data. Economists also highlighted that a weak monsoon can raise farming costs and reduce crop yields, especially if heat stress persists. With around 51% of India’s farmland relying directly on monsoon rains and accounting for nearly 40% of total agricultural production, even a localised deficit can show up in specific crop prices. Nearly half of India’s population depends on agriculture and allied activities for livelihood, which makes rural income sensitivity an important secondary channel.

West Asia crisis adds pressure on inputs and costs

Beyond the weather, the West Asia crisis is already creating an input-cost challenge for agriculture, according to the reports. Economists flagged pressure on availability and costs of diesel and fertilisers, which can affect sowing decisions, irrigation economics, and the cost of cultivation. This matters because even if rainfall outcomes improve later, higher input costs can still squeeze farm margins. The same energy dynamics can feed into broader inflation, complicating the policy trade-offs. The combined shock of weather uncertainty and input inflation is one reason analysts expect policymakers to watch food and fuel data closely through the season.

Market impact: rural demand and rate-cut expectations

A weaker monsoon can affect rural demand by compressing farm output and rural incomes, which then influences spending on goods and services. The reports note that this can impact sectors such as automobiles, consumer goods, and retail that rely on rural consumption cycles. Another channel is monetary policy expectations: poor rainfall can push up food prices and limit the scope for interest rate cuts, according to economists cited in the coverage. Some economists also pointed to the possibility of growth forecasts being trimmed if a poor monsoon is added to other shocks, though the timing depends on rainfall realisations and inflation prints. Separately, SBI Research has maintained that India’s growth momentum remains broadly intact, supported by domestic consumption and investment activity, and expects GDP growth in the 6.8% to 7.1% range even as inflation risks tilt upwards.

Key numbers at a glance

Analysis: why the story hinges on localised stress

The central takeaway from the forecasts and economist notes is that the growth impact is no longer a simple function of the all-India monsoon deviation. With historically low correlations between rainfall and both agri-GVA and GDP growth in the ETIG analysis, the macro hit may stay limited unless rainfall weakness concentrates in critical producing regions or coincides with supply-side shocks. That is where the risk mix becomes more nuanced in 2026, given the additional pressure on diesel and fertiliser costs from West Asia disruptions. Inflation outcomes, especially food inflation, can still change meaningfully if crop losses emerge in key belts or if heatwaves reduce yields. For investors, the practical focus shifts to weekly rainfall distribution, reservoir levels, and high-frequency food price indicators rather than a single seasonal headline.

Conclusion: a season where distribution and inputs may drive outcomes

IMD’s May 29 downgrade to 90% of LPA, along with a 60% probability of deficient rainfall, has increased attention on food inflation risks and rural demand sensitivity in FY27. While long-run data suggests the rainfall-GDP link has weakened, economists are still cautioning that inflation could move above 5% if production is hit in vulnerable regions. The interaction with elevated energy and fertiliser costs adds a second layer of uncertainty for both farm profitability and headline inflation. In the weeks ahead, markets and policymakers are likely to track updates on rainfall distribution, heat stress, and food price trends as the monsoon progresses through June to September 2026.