El Nino likely to add to existing inflationary pressures, buffer stocks well-positioned: Eco Review

New Delhi: If rainfall is deficient due to the development of El Nino in June, the transmission to food inflation, rural demand and aggregate growth could be swift, adding to the existing inflationary pressures stemming from elevated global energy prices, the Finance Ministry’s ‘Monthly Economic Review’ for May said on Saturday.

Looking ahead, agricultural prospects for the upcoming kharif season are a source of both near-term comfort and medium-term caution, it said.

“On the positive side, buffer stocks are well-positioned. The total stock of rice and wheat held by the Food Corporation of India and state agencies stood at 817.53 lakh tonnes as of end-April 2026, and reservoir storage was at 123.86 per cent of the decadal average, providing a favourable starting point ahead of the monsoon,” the Economic Review noted.

Summer crop sowing has also expanded, with area coverage at 83.08 lakh hectares, up from 80.01 lakh hectares in the corresponding period last year.

In the above context, it is important to see that the India Meteorological Department (IMD) has indicated a likely transition from ENSO-neutral conditions to El Nino during the 2026 monsoon season, with overall rainfall projected at around 92 per cent of the Long Period Average and a significant probability of deficient rainfall depending upon other climatic factors’ interaction with El Nino.

“During strong El Nino years with deficit rainfall, rice production remained relatively resilient due to higher irrigation coverage in major producing states. Pulses and oilseeds, which are highly climate-sensitive and concentrated in rainfed regions, have historically experienced declines in acreage, yields, and production during El Nino episodes,” the Review stated.

In addition, livestock and dairy operations may face stress due to fodder shortages, lower milk yields, and rising feed costs.

On the other hand, demand conditions continue to remain resilient. Domestic automobile sales show strong growth across all segments — two and three-wheelers, passenger vehicles, commercial vehicles and tractors.

Domestic air passenger traffic declined 1.3 per cent year on year, signalling some softening in demand. With forecasts pointing to a below-normal monsoon and a likely moderation in economic activity, overall consumption demand may face headwinds in the coming months, said the Finance Ministry document.

–IANS