Amid heightened market volatility and uncertainty following Trump’s announcement of tariffs on several nations, there’s finally some good news. Earlier, the IMD had warned of a hotter-than-normal summer between April and June 2025, with most regions expected to experience unusually high daytime and nighttime temperatures — conditions that have economic consequences. Now, the forecast has taken a positive turn: India is likely to experience a good monsoon this year. That’s not only reassuring for farmers but also for businesses, given the strong interdependence between the two.
Let’s break it down and explore what it might mean for investors.
What’s Happening?
On April 15, the India Meteorological Department (IMD) announced that the country is likely to receive above-normal monsoon rainfall in 2025 — estimated at around 105% of the long-period average (LPA), which translates to roughly 5% more than the historical average of 87 cm. The forecast comes with a model error margin of 5%. If this materialises, it would mark the second consecutive year of above-normal rainfall. Last year, India received 8% more rainfall than the historical average during the June–September monsoon period.
In 2024, India recorded its best monsoon in four years, receiving 935 mm of rainfall — 8% above the LPA of 870 mm.
Despite the ongoing extreme heat across most parts of the country — as predicted earlier — the IMD now expects a normal to above-normal monsoon in the range of 96% to 105% of the LPA for most regions.
A good monsoon is critical for India, where about 52% of the net cultivated area depends on the primary rain-bearing system. The agriculture sector contributes around 18.2% to the country’s GDP and supports the livelihood of nearly 42.3% of the population.
Uneven Monsoons & Food Inflation
In countries like India, the monsoon season plays a pivotal role in agricultural productivity. Any deviations — whether below-average, uneven, or excessive rainfall — can have a major impact on food inflation.
Severe heatwaves during summer, combined with weak or erratic monsoon rainfall, can significantly hamper crop yields. In fact, due to the uneven and below-normal monsoon rains last year, food prices remained elevated — staying above 7% between November 2023 and June 2024, as reported by Livemint.
A consistent supply shortage — regardless of the cause — plays a key role in driving food inflation. Not only does a drop in crop yield push prices higher, but erratic rainfall also disrupts supply chains, challenges transportation, leads to labour shortages, and creates logistical bottlenecks.
What’s in it for Investors?
A favourable monsoon season generally boosts agricultural productivity and raises rural household incomes. It also helps maintain a steady supply of farm produce, stabilising food prices. This in turn may pave the way for potential interest rate cuts by the central bank.
The impact won’t be confined to rural areas. Rising rural incomes can trigger demand growth in sectors such as agrochemicals, fertilisers, tractors, two-wheelers, financial services, and FMCG. Moreover, microfinance institutions and non-banking financial companies (NBFCs) with a strong presence in rural regions could witness improved credit growth and better repayment rates.
What’s Next?
While global headwinds like trade tensions continue to add to market volatility, the IMD’s forecast of an above-normal monsoon in 2025 brings a ray of hope. With India’s agriculture sector heavily reliant on rainfall, a good monsoon has the potential to improve crop yields, stabilise food prices, and uplift rural consumption.
In turn, this could benefit several sectors and offer tailwinds to the stock market — making this an interesting season for investors keeping an eye on monsoon-led opportunities.
*The article is for information purposes only. This is not investment advice.
*Disclaimer:Teji Mandi Disclaimer
