India could be heading into a challenging food inflation cycle as the India Meteorological Department (IMD) forecasts a 10% rainfall deficit during the 2026 southwest monsoon season, while El Niño conditions are expected to develop over the coming months. Economists warn that the combination of weaker rainfall and rising temperatures could affect crop production, disrupt food supplies and push up prices of key household staples such as tomatoes, onions, milk and cereals.

A recent HDFC Bank Treasury Research report highlights that tomato prices have already surged 34% month-on-month in May 2026, offering an early indication of weather-related pressures emerging across agricultural markets.

What's the concern?

The IMD has projected monsoon rainfall at 90% of the Long Period Average (LPA), placing it in the below-normal category. Historically, India has experienced seven El Niño episodes over the last 25 years, and six of them were accompanied by below-normal monsoon rainfall, typically resulting in deficiencies of 8-10%.

According to HDFC Bank's analysis, every one percentage point shortfall in monsoon rainfall below the LPA is associated with approximately 0.4 percentage points lower crop GVA growth, highlighting the close relationship between rainfall and agricultural output.

The impact is particularly significant because food and beverages still account for nearly 37% of India's Consumer Price Index (CPI) basket. Even moderate disruptions in food production can therefore have a meaningful impact on overall inflation.

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Which food items are most at risk?

Tomatoes

Tomatoes appear to be facing the most immediate pressure. Heatwaves across several parts of the country have already affected supply conditions, helping push prices up by 34% in May. Since tomatoes are cultivated across multiple seasons, continued heat stress and rainfall disruptions could keep prices elevated in the coming months.

Onions

While a strong rabi harvest may provide some short-term relief, economists see risks emerging later in the year. Kharif onion production is crucial for maintaining supplies during the August-October lean season. Below-normal rainfall and heatwaves could affect sowing activity, potentially leading to higher onion prices during the second half of FY27.

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Milk

Milk inflation has historically risen during El Niño and severe heatwave years. High temperatures can reduce dairy yields and create fodder shortages, increasing production costs for farmers. Rising packaging and transportation costs may add further pressure to retail milk prices.

Cereals

Rice production may remain relatively resilient due to high irrigation coverage, but cereals are not entirely insulated. El Niño could impact major rice-producing countries such as Thailand, Vietnam, Indonesia and the Philippines, potentially pushing up global grain prices. Domestic cereal inflation has historically shown a close correlation with global trends.

What could this mean for inflation?

Food inflation during El Niño years has historically been around 170 basis points higher than during normal monsoon years. Milk, vegetables, cereals, pulses and spices have typically been the largest contributors to inflationary pressures.

HDFC Bank estimates that CPI inflation could average 5.1% in FY27, while cautioning that prolonged El Niño conditions, persistent heatwaves and higher commodity prices could push inflation beyond current forecasts.

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There is, however, one important cushion. Reservoir storage levels stood at 41% of live capacity in April 2026, the highest reading for this period since 2022. This could help support winter crop production and partly offset the impact of a weaker monsoon.

For consumers, the coming monsoon season may determine whether today's spike in tomato prices remains isolated—or becomes the first sign of a broader increase in India's food bill.

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Published on: May 30, 2026 7:10 AM IST