El Nino likely to add to existing inflationary pressures, buffer stocks well-positioned: Eco Review
New Delhi, May 30
If rainfall is deficient due to the development of El Nino in June, the transmission to food inflation, rural demand and aggregate growth could be swift, adding to the existing inflationary pressures stemming from elevated global energy prices, the Finance Ministry's 'Monthly Economic Review' for May said on Saturday.
Looking ahead, agricultural prospects for the upcoming kharif season are a source of both near-term comfort and medium-term caution, it said.
"On the positive side, buffer stocks are well-positioned. The total stock of rice and wheat held by the Food Corporation of India and state agencies stood at 817.53 lakh tonnes as of end-April 2026, and reservoir storage was at 123.86 per cent of the decadal average, providing a favourable starting point ahead of the monsoon," the Economic Review noted.
Summer crop sowing has also expanded, with area coverage at 83.08 lakh hectares, up from 80.01 lakh hectares in the corresponding period last year.
In the above context, it is important to see that the India Meteorological Department (IMD) has indicated a likely transition from ENSO-neutral conditions to El Nino during the 2026 monsoon season, with overall rainfall projected at around 92 per cent of the Long Period Average and a significant probability of deficient rainfall depending upon other climatic factors' interaction with El Nino.
"During strong El Nino years with deficit rainfall, rice production remained relatively resilient due to higher irrigation coverage in major producing states. Pulses and oilseeds, which are highly climate-sensitive and concentrated in rainfed regions, have historically experienced declines in acreage, yields, and production during El Nino episodes," the Review stated.
In addition, livestock and dairy operations may face stress due to fodder shortages, lower milk yields, and rising feed costs.
On the other hand, demand conditions continue to remain resilient. Domestic automobile sales show strong growth across all segments -- two and three-wheelers, passenger vehicles, commercial vehicles and tractors.
Domestic air passenger traffic declined 1.3 per cent year on year, signalling some softening in demand. With forecasts pointing to a below-normal monsoon and a likely moderation in economic activity, overall consumption demand may face headwinds in the coming months, said the Finance Ministry document.
— IANS
Reader Comments
Stability in buffer stocks is comforting but the fodder shortage for dairy is scary. My village in Maharashtra is already struggling with milk yield dropping. We cannot just rely on last year's reservoir levels. ☔
This is a very balanced review. It rightly points out that rice will survive but pulses & oilseeds will suffer. Our dal prices are already high; imagine if El Nino hits hard. The government needs to urgently strengthen MSP procurement and open market sales to control prices.
I think the Review is accurate. Our reservoirs are in good shape thanks to last year's good monsoon, but a below-normal monsoon this year will mess up the kharif sowing. And why is air traffic down? That's interesting, maybe it's a reflection of overall demand softening already.
As someone who follows global weather patterns, El Nino is a serious threat to emerging economies like India. The buffer stocks are a good cushion, but the real issue is that inflation will be slow to correct even if monsoon is normal due to already elevated global energy prices. Let's hope the monsoon surprises us.
Honest question: Is this just another government attempt to manage expectations? Every year there's El Nino predictions and sometimes it doesn't materialise. But yes, the farmer community especially in rain-fed areas deserve better support. Let's hope our irrigation network can handle it. 💧
K We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.