Tag: agriculture

Rainfall Deficit and Climate Risk in India: This Year and in Years to Come

Rainfall Deficit in India 2026: The Uneven Sowing Shock

The southwest monsoon in India has begun on a weak footing. Rainfall during June was around 40% below the long-period average, and kharif sowing is consequently running 23% behind last year’s pace.

At first glance, this appears to be a nationwide agricultural slowdown. A closer examination of satellite data, however, tells a different story. Bihar has witnessed the sharpest decline, with sowing down 83.3%, followed by Telangana and Jharkhand (72.5% each) and Maharashtra (60.3%). Andhra Pradesh, Tamil Nadu, Gujarat and Karnataka have all recorded declines ranging from 34% to 52%. And sowing is up compared to previous year in case of Punjab (+107.4%), Haryana (+38.8%) and sowing has progressed faster than the previous year in Rajasthan and Madhya Pradesh as well.

In other words, large parts of India are performing far worse than the national average, while several irrigated states have continued sowing despite deficient rainfall.

This immediately raises an important question. If rainfall has been weak almost everywhere, why are some states able to continue sowing while others have almost come to a standstill?

Irrigation Explains Part of the Story – but Not All of It

The most obvious explanation is irrigation coverage. States with extensive and well-developed irrigation infrastructure – Punjab, Haryana, Uttar Pradesh and, increasingly, Madhya Pradesh – have displayed considerably greater resilience. Irrigation reduces dependence on the arrival of the monsoon, allowing farmers to proceed with sowing even when rainfall is delayed.

At first sight, this appears to explain the regional differences. Yet the data reveal an important anomaly. Bihar officially reports irrigation coverage that is higher than the national average, but it is also the state with the largest decline in sowing. Clearly, irrigation coverage alone cannot explain agricultural resilience.

The more relevant question is not whether irrigation exists, but whether farmers can access irrigation water when they need it.

Access to Water Matters More Than the Availability of Water

The distinction between water availability and water access is becoming increasingly important. Bihar’s irrigation system is fundamentally different from the canal-based systems found in north-western India. About 65% of the irrigation in Bihar is dependent on shallow tube wells powered by diesel pumps rather than large public canal networks (like, say in Punjab).

This changes the economics of irrigation. Many farmers own relatively inexpensive centrifugal surface pumps. These pumps function well when groundwater levels remain high. However, once groundwater falls below roughly six to seven metres during the pre-monsoon season, centrifugal pumps lose suction and stop working. Only submersible pumps can lift water from greater depths.

Submersible pumps solve the engineering problem but create a financial one. They cost roughly significantly more than conventional surface pumps. For many smallholders, this capital investment is unaffordable. As a result, groundwater may still be physically abundant beneath the surface (at slightly lower levels), but access increasingly becomes restricted to farmers who can afford submersible pumps. Therefore, the problem is not necessarily groundwater scarcity. It is unequal ability to tap groundwater.

Irrigation Can Also Become Too Expensive to Use

Even where irrigation equipment exists, farmers may choose not to use it. Diesel-powered irrigation is expensive, particularly for water-intensive crops such as paddy. Every irrigation cycle increases fuel costs, creating an incentive to postpone pumping until rainfall arrives. This behaviour is supported in the government’s own advisory, which recommended delaying paddy transplantation until cumulative rainfall reaches around 75–100 mm. Implicitly, this acknowledges that irrigation infrastructure is not fully substituting for rainfall. Farmers continue to time their sowing around the arrival of the monsoon because pumping remains economically costly.

However, the danger is that waiting for rain can push sowing beyond the crop’s optimal planting window.

The Poorest Farmers Face the Highest Irrigation Costs

Many farmers do not own irrigation pumps at all. Instead, they purchase irrigation water from neighbouring farmers who own wells and pumps. Although electricity used for irrigation may be subsidised, rented irrigation water is supplied through private markets and therefore reflects commercial pricing.

Ironically, this means that the poorest farmers, who can not even afford pumps, often pay the highest effective price for water. In years of delayed rainfall, these costs rise further as demand for irrigation increases while the number of functioning pumps remains limited. Consequently, climate shocks amplify existing inequalities within rural economies rather than affecting all farmers equally.

Recovery for this year Depends on Crop Biology, Not Just Rainfall

So, as of now, we have just looked at June data and not everything is lost. The monsoon season is still continuing. If rains can “catch up”, sowing should recover. But, the reality is that even if rainfall improves during July, not every crop can recover equally. Each crop has its own biological sowing window, and once that window closes, later rainfall cannot fully restore production. Some examples below:

Rice remains relatively resilient because most transplantation normally occurs during July. If eastern India (and hence Bihar) receives adequate rainfall over the coming weeks, a substantial proportion of delayed acreage can still be recovered. So, Bihar could potentially make up and get back on track.

Cotton also retains meaningful recovery potential because its sowing window extends into mid-July. Current delays therefore represent deferred timelines rather than permanent loss, provided rainfall improves soon.

Soybean presents a much more difficult challenge. Its sowing window closes relatively early, and flowering is controlled by day length rather than planting date. Delayed sowing therefore leads to permanently lower yields. Much of the current acreage deficit is unlikely to be recovered, increasing the likelihood of higher edible oil imports later in the year.

Tur (arhar), a type of pulses, faces a similar biological constraint. Delayed sowing shifts flowering and grain filling into cooler months, reducing yields even if acreage eventually recovers. This creates one of the fastest transmission channels from weather shocks to higher retail pulse prices.

Rainfall Alone No Longer Determines Food Inflation

Even a significant improvement in rainfall during July may not completely de-risk the agricultural season. HSBC’s analysis suggests that temperature, rather than rainfall, has become the dominant driver of food inflation during El Niño years. Rising temperatures reduce crop productivity even when irrigation water is available, while heat stress lowers yields independently of rainfall. This represents an important structural shift.

Historically, good monsoon rainfall was often sufficient to alleviate inflation concerns. Today, rainfall recovery addresses only one part of the problem. Elevated temperatures continue to suppress productivity, particularly for heat-sensitive crops, creating inflationary pressures that persist even after rainfall normalises.

The implication is that India’s agricultural risks are no longer driven by rainfall alone. They emerge from the interaction of rainfall, groundwater access, irrigation technology, energy costs and crop biology. Understanding these interconnected regional ecosystems is becoming essential for assessing farm incomes, rural credit quality, business viability and food inflation.

The El Nino “Myth”

The media narratives around El Nino for India have pointed at the inevitability of weak monsoons this year blaming El Nino. However, data says otherwise. As per official estimates, Since 1950, there have been 16 El Niño years, out of which 7 years had impacted Indian monsoon rainfall when rainfall was below normal.

What are the lessons for businesses, financial institutions and policy makers?

The central lesson emerging from these analyses is that India’s agricultural economy is becoming increasingly heterogeneous. Climate risk is no longer simply a question of how much rain falls nationally.

It is increasingly determined by where and when rainfall arrives, where temperatures exceed biological thresholds, which crops dominate local farming regions, whether irrigation infrastructure exists to buffer climatic shocks and whether the irrigation infrastructure creates equal access to water.

For policymakers, this demands geographically targeted intervention. For lenders, it requires regional ecosystem based credit assessment. For businesses, it means recognising that supply chain shocks and future opportunities will be driven less by national averages than by regional climate resilience and region specific factors.

Unless dealt through regionally nuanced policy support, there is a possibility that we will see widening economic gap between regions capable of adapting to climate volatility and those that remain dependent on increasingly unpredictable weather.

Moreover, unless businesses adjust their strategy based on regional characteristics, they will be more prone to weather shocks. While these regional variations existed earlier, the increasing volatility of the weather will be making more organisations fragile. Can organisations adjust their strategy to not just be resilient but benefit from the volatility to be what Nassim Nicholas Taleb would call Antifragile?

This article synthesises ICRA Research’s “Southwest Monsoon and Agriculture” (July 2026), HSBC’s “India: Forget the Rains” (18 May 2026), and an independent satellite-based sowing analysis by Satsure team, “Sixteen States, One Misleading Number” (2 July 2026) and Commentary (1,2) by Avinash Kishore (Senior Research Fellow, IFPRI). Figures and forecasts belong to the respective sources. I recommend going through the individual sources in detail for a more comprehensive understanding of the context.

MUDRA Bank – How will it help?

First things first, a regulator cum re-financier (market player)  is bad design. Period. It leads to moral hazard where the regulator will shape policy to grow only its business. Yes, refinance is business.

But I hear that MUDRA Bank is expected to be a regulator and financier of microfinance institutions and micro-enterprises. Why?

The only other entity with such an entitlement, the National Housing Bank (which is a regulator and refinancier for Housing finance companies and bank housing loans) is expected to lose that status once the long pending NHB Bill is passed in its current form. The bill aims to move the regulatory powers of the NHB to the RBI and let NHB continue to operate as a sector focussed bank like NABARD and SIDBI. Obviously, the law makers realised that regulation and business do not go hand in hand.

That brings me to the second question, NABARD refinances MFIs, so does SIDBI. SIDBI refinances/ guarantees small/micro enterprise finance. So, basically, between the two they pretty much already do what the MUDRA Bank is supposed to do on the refinance side. So, why do we need a MUDRA Bank?  Yes, they don’t regulate. So, to regulate?

When the microfinance crisis broke out, there were discussions of NABARD being made a regulator for the MFI industry but that did not happen, primarily due to the fact that NABARD was actually a refinancier (a service provider) for MFIs and the significant majority wanted NABARD to continue as a service provider and not become a regulator in parts due to the lack of infrastructure and in parts to avoid the moral hazard issue. The only reason why NABARD was brought into the picture was microfinance institutions not only included the RBI regulated NBFC-MFIs but also societies and trusts not regulated by he RBI.  However, NABARD felt that they did not have some of the “missing links to operate in the sector” as a regulator.

What then, will the MUDRA Bank do differently? If the several decade old and experienced NABARD thinks they can’t handle the job, how will the MUDRA Bank manage?

Another interesting proposed change is that the FMC and SEBI are going to be merged, the logic seems to be that financial and commodity markets are, at the end of the day,markets and hence they should have a common regulator because this will streamline decision making and potentially trigger new products. Great!

And there comes my third question, why then are we trying to create multiple entities for microfinance and enterprise finance? Where is the coherence in “strategy”?

Instead of seeding new ideas, would it not be better to energise the NABARD and SIDBI to take the word “Development” in their names seriously for their respective sectors? To adopt innovation and  shake away  some of the bureaucracy that binds them down? To adopt proactive measures to tackle the problem of access to finance for small businesses?

And please, for the sake of humanity, why should a bank promoting entrepreneurship favour only the scheduled castes and tribes? Favour all enterpreneurs, if you can. Nobody does that in our country.

(Edited on 9th March, 2015 to add an article on the same topic by noted journalist/author Mr. Tamal Bandyopadhyay. He seems to point out similar concerns.)

Will de-listing of Fruits & Vegetables from APMC Act affect price?

Recently, the Indian Central Government requested all State Governments to delist fruits and vegetables from the Agriculture Produce Market Committees Act (APMC Act). This was to address rising price in fruits and vegetables. I was trying to understand how this would affect things going forward. A basic analysis of what I think is going to happen is given below.

Currently, the APMC Act makes it mandatory for farmers to sell their produce only to licensed merchants at mandis set up by state agriculture marketing boards. So, it is being said that delisting will eliminate these licensed merchants or middlemen who set up a cartel and raise the prices for super normal profits. So, farmers will now be able to sell directly to retailers or food processors and hence the buyers will get fruits and vegetables at a lower price.

In addition, commissions earned by the agents, mandi tax, octroi, VAT or sales tax and inter-state movement charges add to the price of fruits and vegetables. Delisting from APMC Act would enable sale of fruits and vegetables to happen without payment of commissions, mandi tax/cess. This means that delisting would certainly wipe out state revenues from mandi tax/cess and potentially reduce price but will it enable farmers to sell directly to consumers/buyers and avoid traders/commission agents?

Does the farmer sell at the APMC market even today? The Planning Commission says that 75% of farmers sell their produce at the farmgate to traders, aggregators and sometimes contract buyers. In earlier initiatives taken in Bihar or even Andhra Pradesh and a few other states, doing away with APMC Act restrictions or setting up of Farmer Markets have not been able to eliminate middle men completely and that is due to practical issues. It is mostly the aggregators or agents who take farmer certificate and sell under their name in the farmer market. For the sake of convenience, a group of farmers generally find somebody from the village and sell their produce to him and he gets a license to operate in this market as a “farmer”. This is to arrive at a commercially viable and practical aggregation volume for transportation and time saving.

This means that under current situation, farmers are not reaching the APMC mandi anyways because of practical difficulties. How will they reach the consumer directly now when the fruits and vegetables have been delisted?They will need intermediaries or they will need consumers to reach out to them directly. Consumers will not be able to reach farmers directly. Fact is, they will need intermediaries, be it the local aggregators or the corporate retailers/buyers.

Question is, how do you ensure that the intermediaries do not form a cartel that jacks up prices for buyers once again? Will this deregulation reduce strength of cartels or lead to an increase in their power? In the past, states have delisted fruits and vegetables but haven’t succeeded in breaking cartels. So it is unlikely that cartels will get demolished just by delisting. The cartel will weaken only when alternate channels are built to enable competition. Delisting enables corporate buyers to buy directly without having to depend upon intermediaries or having to enroll at the mandi and having to pay mandi cess. So, this will increase competition (at the cost of state revenues) but how will they reach farmers immediately? It is obvious that It is not going to immediately cool off the prices and it needs long term efforts in addition to just delisting. Unless multiple mutually independent market players enter the market, the pains of having to deal with high price will continue.

Another key component of the high price is spoilage that happens due to lack of appropriate cold chain facilities and change of multiple hands. So, it is important that this delisting initiative is followed by building physical infrastructure and competitive markets.

Such infrastructure has to be built by both private and public resources. Through policy stability and direction, large corporate buyers will now be encouraged to set up procurement networks deep into producing locations. It is also important that the state continues to provides alternate channels to farmers by building cold chain and storage facilities and supporting development of multiple options of storage and sale. Unless this is done, the corporate buyer may form one more cartel.

Let’s face it. Farmers will not reach retailers or consumers directly. We will need intermediaries, be it local aggregators or corporate buyers. We have to take steps to improve efficiency in movement of fruits and vegetables through these intermediary channels to ensure quality at the right price.

It is easier said than done. Delisting of fruits and vegetables is the first, easy to implement step (though politically difficult). It must be followed by a series of difficult to implement steps that promote appropriate infrastructure to improve efficiency and ensure availability of fruits and vegetables at the right price. Hopefully, after paying the appropriate mandi taxes. 

What do you think?

Next…what?

 

Renewable Energy.

Water.

Medical Technologies. (Detection and treatment)

Agriculture.- Food production & Food preservation.

That is where breakthrough innovation is required. We will possibly see breakthrough innovations in these areas (in that order) in future. Something similar to what we have seen in case of communication technologies over the past decade.

While Renewable Energy and Medical Technologies have received venture investments, Agri-Tech and Water are still to see mainstream venture capital investments.