How good monsoon will help central India’s economy this year?

The monsoon has picked up pace. So far, the country has received 9% more rain than the long-term average. Due to this, sowing of Kharif crops has increased by 47% compared to last year. The area under paddy, pulses, and oilseeds has increased the most. This may further reduce inflation, which had already dropped to 2.82% in May. Lower input costs could also improve company margins and lift stock market sentiment.

Monsoon boosts sowing, cools inflation.

According to the India Meteorological Department, 19 out of 36 subdivisions, covering 49% of the country, received normal or excess rainfall till June 30. Central India saw 25% above-average rain, benefiting major farming states like Madhya Pradesh, Chhattisgarh, and Maharashtra.

Farmers have responded quickly. A report published by Bank of Baroda on June 28 said, “The total sown area for Kharif crops has increased by 11.3% year-on-year as of June 27, 2025.” The increase is driven mainly by strong rainfall and early monsoon onset.

A similar assessment by ICICI Bank noted that rice sowing rose sharply by 47.3%, and pulses by 37.2% compared to last year. “Kharif sowing is off to a good start (+11.3% YoY) led by rice (47.3% YoY) and pulses (37.2% YoY), which bodes well for the food inflation outlook this year,” the bank said in its latest update.

ICICI Bank reported that June rainfall stood at 109% of the long-term average, slightly above IMD’s forecast. Key agricultural states such as Rajasthan, Gujarat, Madhya Pradesh, Haryana, Punjab, Tamil Nadu, Uttar Pradesh, Karnataka, and West Bengal received above-normal rain, further aiding sowing progress.

The Bank of Baroda report highlights that the biggest gains are in paddy (47%) and pulses (37%). Within pulses, sowing of urad and moong has grown the most. Oilseeds like soybean and groundnut also recorded higher acreage. Cotton acreage, however, declined by 9%.

Kharif Crop Sowing (in lakh hectares)

The report also notes that 161 major reservoirs across India were 16% fuller compared to the same time last year, as of June 26. In central India, reservoir storage increased by 24%. Better water availability will support irrigation and reduce the risk of mid-season crop failure.

The rural economy is already seeing ripple effects. Farmers are spending on inputs like seeds, fertilisers, and diesel. This activity is reviving demand in nearby towns and mandis. Retailers, transporters, and service providers are seeing higher footfall and transactions.

A report from the Ministry of Agriculture pointed out that tier-2 and tier-3 cities, which are closely linked to rural areas, have started to see more economic activity. “When farmers have money in their pockets, they spend more in nearby towns,” the report said. This benefits local businesses, construction, and logistics services.

Good rainfall also helps control food prices. Last year, a delayed and uneven monsoon caused crop damage in several states. Retail inflation peaked at 10.87% in October 2024. Vegetables rose 28%, while pulses and cereals became costlier by up to 17%.

This year, better rainfall may ease those pressures. In fact, Bank of Baroda said in its report, “Early and above-average rainfall will likely keep food inflation in check if sowing continues at the current pace.”

There’s also a market angle. Historical data shows that strong monsoons often lead to better stock market returns. In 2020 and 2022, when rainfall was above normal, the Sensex rose by 14% and 16%, respectively. In contrast, it barely moved in poor rainfall years like 2018 and 2023.

July rain may boost crops

Forecasts for July are optimistic. Mrutyunjay Mohapatra, Director General of the IMD, said at a press briefing, “July rainfall is expected to be 106% of the long-term average.” Since July contributes a third of total seasonal rainfall, this could further improve crop prospects.

IMD expects July rainfall to be about 6% above normal, especially in central and eastern states. Mohapatra warned that areas like Chhattisgarh, Odisha, Telangana, and parts of Madhya Pradesh may face very heavy rains, raising flood risks in river basins such as Krishna, Godavari, and Mahanadi.

The monsoon has already covered the entire country nine days ahead of schedule. This is the fastest progress since 2020 and only the 13th such instance since 1960.

But risks remain. Floods could damage early crops in low-lying areas. Eastern and northeastern regions have received 17% below-normal rainfall, which may affect total national output. Still, for central India, early signs point to stronger farm income, more rural jobs, and rising demand in small towns, pushing the regional economy forward.

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