Industry Odisha Bureau, Jul 13: Amid global commodity volatility linked to tensions in West Asia, the IMD’s El Nino forecast is very likely to impact Indian economy this year, feel economists and other experts of the country.
The southwest monsoon has set over India, leaving the country with a 42 per cent rainfall deficit between June 4 and July 13, according to India Meteorological Department (IMD) data.
El Nino triggers an increase in global temperatures and impacts rainfall patterns. This weather phenomenon which is due to warm ocean waters has the potential to impact the monsoon rains which are crucial for the country’s farm sector.
Agriculture’s contribution to gross domestic product (GDP) has fallen sharply over time and now stands at around 14-16 per cent, while services account for more than half of gross value added.
Yet agriculture continues to influence household incomes, consumption and inflation through its large employment base.
Agriculture’s contribution to gross domestic product (GDP) has fallen sharply over time and now stands at around 14-16 per cent, while services account for more than half of gross value added.
Yet agriculture continues to influence household incomes, consumption and inflation through its large employment base, an expert said.
Jitendra Tanwar, founder and managing director at Namdev Finvest, said rain-fed crop regions remain the most vulnerable. “The most vulnerable segments are clear. Rain-fed agriculture belts that depend on kharif crops — pulses, oilseeds, coarse cereals, and to a significant extent sugarcane-linked enterprises in Maharashtra and Uttar Pradesh — face the sharpest immediate impact.”
El Niño-related weather risks could affect agricultural loans, though overall banking sector credit growth is expected to remain healthy in FY27, according to a report by Yes Securities.
The brokerage said it does not expect any material rise in credit costs in FY27 compared with FY26, while the implementation of Expected Credit Loss (ECL) norms in FY28 is also unlikely to trigger any major one-time impact on banks’ balance sheets.
Agricultural lending remains a key segment under watch as weather conditions evolve. The report noted that while El Niño may impact some farm-linked loans, historical trends suggest the effect is unlikely to be severely disruptive unless a stronger or “Super El Niño” event develops.
El Niño has emerged as one of three major monitorables for lenders, alongside the West Asia conflict and the delayed impact of global trade tariffs. These factors could influence credit quality across sectors, particularly in rural and small business lending.
The report said stress in unsecured lending has started easing after earlier pressure caused by economic slowdown and overheating in the segment. However, risks may persist due to slower nominal GDP growth and potential pressure on microfinance borrowers if adverse weather affects rural incomes. MSME loans also remain under scrutiny because of geopolitical and trade-related uncertainties.
Bank credit growth, currently around 17%, is being driven by improving corporate demand and strong MSME and retail loan expansion. Though growth may moderate later in the financial year, it is expected to remain in the low-to-mid teens range.
Here are the some measures suggested by the experts to overcome the arising situation
Short-Term Measures
Strengthen buffer stocks to manage food supply.
Monitor food inflation and take proactive measures.
Support farmers in vulnerable districts with contingency plans.
Manage fertiliser supply through diversified imports.
Medium-Term Reforms
Expand irrigation coverage, especially in rain-fed regions.
Promote water-efficient crops and precision agriculture.
Strengthen crop insurance with quicker settlements.
Enhance weather forecasting and early warning systems.
Long-Term Strategy
Drought-proof the economy through structural reforms.
Move from crop insurance to ex-ante risk reduction.
Invest in drought-resistant, high-yielding crop varieties and ensure farmer access.
Modernise water storage and management infrastructure.
Diversify rural economy to reduce dependence on agriculture alone.
Strengthen public investment in agricultural R&D and disaster preparedness.
