Monsoons even more important today: Financial Express 15th April 2026

 Agriculture has witnessed a decline in share in GDP by ~8% over the last two decades, mainly due to higher growth in the services sector. There have been limits to agricultural growth given the area under cultivation and the productivity levels. Yet, it is the fulcrum for overall growth prospects.

This is because it dominates in terms of employment. Thus, income generated in this sector would be critical for defining the consumption and savings patterns in the coming months. The sector is still heavily dependent on rainfall with around 55-60% of the kharif output being exposed to irrigation facilities. More importantly, the spread is uneven across crops—rice has higher access with around 70% being covered, with pulses at the other end withwn less than 30-35%, and oilseeds and cotton in the middle with around 55% and 50% respectively. The latter will be more vulnerable, as traditionally, production falls when rainfall is sub-optimal. 

Two issues have come up recently which are presently potential red flags that could be raised post June, when the monsoon arrives—the first being the possibility of El Nino or winds that typically herald a weaker monsoon. May-July would need to be monitored to keep a check, and the second half of the year could be vulnerable if this occurs. The second is the initial Skymet forecast which expects monsoon to be 94% of normal. While it is too early to get the right picture, the fact that it is lower than normal requires close monitoring. 

In fact, any forecast of the monsoon at present is just too preliminary; however, having such forecasts is necessary to prepare the farm economy. In fact, a normal monsoon is often a necessary though not sufficient condition for a good kharif crop. While the aggregate number is important for a macro picture, the spread is more important. This can be gauged from the rather diverse access to irrigation for different crops, making the spread across regions and crops vital. 

Crops grown along rivers, especially in the north, tend to be less dependent on rains. The same may hold largely for crops grown in the coastal areas as the south west monsoon winds blow across this region before moving to the interiors. Hence, shortfall in rains in states like Punjab and UP may not really matter for the rice crop. However, the interiors become vulnerable and the Deccan Plateau region is always the area of focus as crops ranging from cotton (Gujarat, Maharashtra and Telangana) to oilseeds (MP, Maharashtra, Gujarat, Tamil Nadu, and Rajasthan) and pulses (Maharashtra, Karnataka, and Rajasthan) are grown here. Further, some of these crops are grown in the rain shadow area, where weak south west monsoon winds could result in the rainfall losing intensity as they cross the mountains and move to the interiors. Here, states like Andhra Pradesh, Karnataka, Maharashtra, and parts of Gujarat and Madhya Pradesh would be affected. 

The kharif crops account for roughly 50% of overall agricultural output—they determine growth the sector accordingly. However, monsoon deficiency of any significant magnitude has a bearing on the reservoir levels. This is an important indicator of water levels required for drinking (humans and animals) besides defining prospects for the rabi crop, which though less dependent on winter rains does use the resources from these reservoirs. This does not consider other erratic conditions such as excess monsoons which has in the past affected the horticulture output in states like Maharashtra, AP, Karnataka, and Telangana, causing spikes in inflation. 

Hence, monsoon progress is carefully studied and tracked for monetary policy. Interestingly, the monsoon pattern has tended to change due to climate variations with the traditional June-September season being extended to July-October. This has been a slow process and several farmers have not yet adjusted to this transformation—thus,  the sowing pattern tends to get skewed on account of the late monsoon. It’s progress is also important as crops require different levels of precipitation at different stages of flowering. 

All this means is that the aggregate rainfall, though a good indicator, does not tell the entire story. The arrival is important as is the progress. Next, the spread across states is important, followed by the coverage of various crops. But excess rainfall or late withdrawal can damage crops. This position is normally known by October, where other perspective come to the fore. 

The kharif crop, which is harvested from September onwards until November provides a clue on the rural income generated. While there are no official numbers on the rural economy, it is believed that roughly 50% would be coming from the farm sector. This income is important for supporting rural demand, which tends to peak in this period—the harvest cum festival season. Rural demand has supported the FMCG and consumer goods industries in the last two years when urban demand has tended to be weak. Therefore, monsoon is critical for companies planning their output as well as investment. 
The war has already led to prices of oil-related products going up, in turn possibly affecting pesticide and fertiliser prices. Here, the government can help. But when it comes to rainfall, it is beyond the purview of any authority, making the progress of monsoon even more important. 

Getting a grip on the forwards position of RBI: Business Line 11th April 2026

 

War shocks markets, exposing India's economic vulnerabilities: FPJ 8th April 2026

 

RBI Policy provides a practical picture of the road ahead amid West Asia war: Business Standard 8th April 2026

 The RBI policy comes at a time when there is uncertainty on the impact of the war on the economy. However, quite significantly, just before the policy was announced, a ceasefire was struck by the United States (US) with Iran for a fortnight. While it is still uncertain if the ceasefire will mean the end of the war soon, the RBI’s statement provides an official view of how one could look at the next 12 months.

 

The RBI was not expected to touch the repo rate, and a status quo seemed most appropriate under these conditions. The stance, too, has remained unchanged at 'neutral', which is significant because if there was a change indicating future rate action, it could have been interpreted as being hawkish. The tone is nonetheless cautious, which is the right approach given the uncertainty.

There are some signs that the war may have impacted the economy, though it is to early to tell as any data for March pertains to the year gone by that could raise red flags for the current fiscal 2026-27 (FY27). The purchasing manager's indexes (PMIs) look less impressive than in February though well above the level of 50. Goods and services tax (GST) collections were steady in March, but shortage of fuels has led to several units in the hospitality business at the micro level closing down. Petro-based industries are still nervous of their fuel supplies, which will have a bearing on performance in Q1. Air fares have gone up and several companies have announced an increase in their prices. 

Against this background (which is very early), the RBI forecasts of gross domestic product (GDP) and inflation can be seen. GDP growth for the year has been projected at 6.9 per cent with a downward bias which will be lower than that last year. Significantly growth in Q1 will be low at 6.9  per cent, followed by three sub-7 per cent growth rates that should capture the war disruption impact. 

Inflation, on the other hand, is projected to be 4.6 per cent this year. It does look like that while the war impact has been buffered in to a certain extent. The possible El Nino impact this year, though acknowledged, may not have been part of the forecasts. This is understandable as it is a theoretical possibility only today.

External account

 

The RBI does sound cautious on the external account as this will be the first point of impact. Exports are to get pressurized with the ongoing challenges on the sea routes. Imports shock is more severe as it involves both physical supplies as well as higher prices being paid for these products. 

 

While commenting on the rupee, no specific measure has been announced. This has been the practice where there is intervention whenever required and forex management is seldom a part of the policy. The same holds for liquidity where there is an implicit assurance of supplies as and when required. This is important because any intervention of the RBI in the forex market will mean withdrawal of liquidity, which is then replenished by the central bank. 

he market reaction has been largely unchanged from the time of announcement of the policy, though all the three markets started off better post the ceasefire announcement- stocks, bonds and currency (helped by unwinding of forwards positions too).  

 

Rate cuts can now be ruled out and the question will be more on when there can be a rate hike. A clearer picture will emerge over the next few months. The August policy will have more complete data points when contemplating rate action.

Interview with Mint on war impact on India: Mint 3rd April 2026

 https://www.livemint.com/money/west-asia-war-india-recession-risk-economic-slowdown-madan-sabnavis-household-budgets-job-market-inflation-interest-rate/amp-11775105443794.html

The cracks in the fuel price ceiling: Indian Express 29th march 2026

 

With the price for crude soaring and oil marketing companies absorbing the blow, attempts to shield consumers may be approaching their breaking point

The government has lowered the excise duty on petrol and diesel to protect the consumer as of now. It is not certain that this situation will remain. There can be further action depending on the course of the war in West Asia and the price of oil. At present, the price of fuel at the pump is unchanged for public sector companies, while one private company has announced an increase. So, for how long can the retail price be held on to?

Let us look at the structure of petrol prices in Delhi. At present, one litre of petrol costs Rs 95. Of this, the actual price charged by the oil marketing companies (OMCs) to the dealer is around two-thirds of the final price or Rs 63/litre post the excise cut. The excise component is now around 12.6 per cent — this is the amount that the government earns of Rs 11.90/litre. The dealer commission is around 4.6 per cent or Rs 4.40 per litre. And then there is the value-added tax, which is 16.2 per cent of the price. VAT, which is charged on an ad valorem basis, is one part of the price that varies across states. This explains why the price of petrol varies across states.

So far, the burden of higher oil prices is being borne by the OMCs. The 66.6 per cent share in the final price also includes a profit being earned by these companies which keeps getting reduced as the cost of crude goes up. The interesting bit is that while Brent had peaked at $118.4/barrel on March 20, the weighted average price for India is close to $150 per barrel. As of March 24, the average price was $147/barrel. The price was $ 71 on February 27, which was just before the war began. Add to this the rupee depreciation of 3.3 per cent during the period from February 27 to March 25, and the cost is up further. It can be seen from this that as long as the Centre and state’s share in the static final price remains unchanged, the same is absorbed by the OMCs.

Here, it must be pointed out that the OMCs earned a higher profit when the price of oil came down to the range of $60-70 per barrel as the consumer price was unchanged at Rs 95/litre and the excise and VAT rates remained unchanged. The government did impose a supernormal profit tax on these companies and hence the gain was apportioned between the two.

However, with the cost of crude increasing sharply, the government has to take a call on apportioning this amount. In the Union budget for FY27, it has been assumed that collections from the excise tax would be Rs 3.88 lakh crore as against Rs 3.36 lakh crore in FY26. The present reduction in excise duty would mean a decline in tax collections. A similar action could also be considered by states. The option to increase the retail price can be exercised and doing so will probably steady the fiscal maths of the government. However, it will run the risk of pushing up inflation at a time when there is already concern over the possibility of this being an El Nino this year.

On balance, it may just be a matter of time before the price matrix is revised. It does look as if the next level of intervention will be at the consumer end, if and when required.

The bulge in government holds held by RBI could be put to work: Mint 24th March 2026

 https://www.livemint.com/market/bonds/rbi-government-bonds-build-infrastructure-open-market-operations-banking-g-secs-11774163252024.html