India’s agriculture sector could face significant stress ahead of the upcoming kharif season, with geopolitical tensions and adverse weather conditions posing a dual threat, according to a latest report by ICRA.
The report highlights that the ongoing West Asia conflict may disrupt fertiliser supplies, potentially driving up input costs for farmers. At the same time, the India Meteorological Department’s forecast of a below-normal monsoon, coupled with the likelihood of El Niño conditions, could further weaken crop output and rural demand.
ICRA noted that India remains heavily dependent on imports for key fertilisers such as DAP, MOP, and NPK, making the sector vulnerable to global supply disruptions. The closure of key trade routes like the Strait of Hormuz has already begun to impact logistics and input costs, particularly for DAP fertilisers.
While fertiliser availability has improved compared to last year, inventory levels in certain categories remain below historical averages, raising concerns about affordability and timely supply during the sowing season.
On the weather front, the IMD has projected monsoon rainfall at 92% (±5%) of the long-period average, marking one of the weakest initial forecasts in over two decades. The potential onset of El Niño further increases downside risks to rainfall, crop yields, and farm incomes.
ICRA has flagged that these combined risks could impact agricultural output, with downside pressure on its FY2027 agri-GVA growth estimate of 3%. Additionally, rising input costs and weaker production may push consumer inflation above 4.5%, particularly through higher food prices.
The report also cautioned that rural sentiment and demand could weaken unless supported by timely policy interventions, including higher minimum support prices (MSP) and measures to stabilise fertiliser supply.
With reservoir levels currently at 47% capacity, some buffer exists, but replenishment will depend heavily on the monsoon outcome. Historical trends show that El Niño years have led to declines in kharif output by as much as 23%, underlining the vulnerability of the sector.
ICRA emphasised that ensuring fertiliser availability, managing supply chains, and supporting farm incomes will be critical to mitigating risks to both economic growth and inflation in the coming fiscal year.