India’s Weak Monsoon Raises Food Inflation Concerns, RBI to Wait Until October

Food inflation concerns are rising due to a weak monsoon in India, but economists do not expect the Reserve Bank of India to hike interest rates immediately. The central bank is likely to wait until after October to assess the impact of the monsoon on agricultural output, food prices, and the broader inflation trajectory.

Monsoon’s Impact on Food Inflation

The monsoon has been weak so far, with India recording a rainfall deficit of roughly 42% as of June 23, 2026. However, despite the weak start, area under sowing shows a moderate pickup compared to last year, tracking higher by 1.7% YoY as of June 19, according to IDFC First Bank data.

Headline Consumer Price Index (CPI)-based inflation for June is tracking at 4.4% year-on-year against 3.9% in May, due to a rise in fuel inflation and a pickup in food inflation, said Gaura Sen Gupta, chief economist at IDFC First Bank.

Impact of Crude Oil Prices

Easing crude oil prices will likely balance out the risks from food inflation, said Gupta. Brent crude oil prices were trading at $75 per barrel on Wednesday, according to Reuters, after reaching a peak of $115 per barrel in mid-May.

Market Impact and Details

• The RBI governor, Sanjay Malhotra, said the inflation outlook remains subject to uncertainties from both crude oil prices and monsoon, adding that it would be difficult to single out one risk over the other at this stage.
• Malhotra also stated that from a food point of view, India has sufficient buffers to meet demand in case of a deficit rainfall.
• However, from a growth point of view, the RBI will have to wait and watch the impact of the monsoon on the economy.

Key Takeaways

• Food inflation concerns are rising due to a weak monsoon in India.
• The RBI is unlikely to hike interest rates immediately, but will wait until after October to assess the impact of the monsoon.
• Easing crude oil prices will likely balance out the risks from food inflation.

FAQs

What is the current rainfall deficit in India?

India has recorded a rainfall deficit of roughly 42% as of June 23, 2026.

How has the area under sowing changed compared to last year?

The area under sowing shows a moderate pickup compared to last year, tracking higher by 1.7% YoY as of June 19, according to IDFC First Bank data.

What is the current inflation rate in India?

Headline Consumer Price Index (CPI)-based inflation for June is tracking at 4.4% year-on-year against 3.9% in May.

Conclusion

The weak monsoon in India has raised concerns about food inflation, but the RBI is unlikely to hike interest rates immediately. The central bank will wait until after October to assess the impact of the monsoon on agricultural output, food prices, and the broader inflation trajectory. Investors and policymakers should closely monitor the situation and be prepared for any potential changes in the RBI’s monetary policy stance.