Fresh challenges for India’s FMCG sector in the coming months could emerge as concerns have emerged over an emerging El Nino weather pattern, which may lead to a weak monsoon, said a report by Phillip Capital.
The report noted, with June rainfall estimated at 40 per cent below normal and the India Meteorological Department (IMD) forecasting another below-normal month in July, a deficient monsoon could hurt agricultural output, weaken rural sentiment and eventually slow FMCG volume growth.
“A weak monsoon could hurt agri output, dent rural sentiment and, with a lag, rural consumption” the report said.
Why the Monsoon Matters for FMCG Companies
The report highlighted that India’s southwest monsoon, which runs from June to September, contributes nearly 80 per cent of the country’s annual rainfall and coincides with the crucial Kharif cropping season. It plays a vital role in the cultivation of key crops such as rice, pulses, oilseeds, cotton and sugarcane, making a healthy monsoon essential for farm output, rural incomes and the broader agricultural economy.
It further noted, a deficient monsoon could weigh on the FMCG sector through multiple channels. Initially, weak monsoon expectations will likely prompt trade inventory destocking and softening demand. Additionally, over the next one to two months, lower crop output could drive food inflation higher, reducing households’ discretionary spending as they prioritise essential purchases.
Subsequently, weaker Kharif production could hurt farm incomes, particularly in rain-fed regions, with the impact becoming more visible after two to three months and weighing further on rural consumption. The report cautioned that while a strong El Nino remains a key risk for the sector, the full impact of a deficient monsoon, if it materialises, is likely to be visible only towards the end of the calendar year.
Why the Impact May Be Less Severe This Time
In a related report, it noted that the potential impact of El Nino on rural demand in 2026 could be less severe than during previous episodes in 2015-16 and 2023, owing to several mitigating factors. Farm incomes have remained healthy following two consecutive years of good monsoons and higher minimum support prices (MSPs) for crops.
Increased irrigation coverage–now around 60 per cent compared with 49 per cent in FY16–has also reduced agriculture’s dependence on rainfall in many key regions.
Higher Reservoir Levels Offer Some Relief
In addition, reservoir levels are about 19 per cent above the long-term average, providing a buffer against rainfall shortfalls.
“Nonetheless, we believe full impact of a deficient monsoon, if any, would be seen only towards the end of calendar year,” it said.
(With inputs from ANI)
Priyanka Roshan is a business writer and assistant editor at the NewsX website who tracks everything from stock market swings and corporate earnings to personal finance trends and policy shifts. Known for turning fast-moving business developments into sharp, reader-friendly stories, she combines speed, accuracy, and a data-driven approach to break down complex financial news for everyday audiences.
With over 9.5 years of newsroom experience, Priyanka has worked with leading media organisations, including Moneycontrol, Times Now, and Ping Digital, covering diverse beats such as business, politics, technology, auto, travel, sports, and the world. From live breaking news desks to SEO-led digital storytelling, she specialises in creating engaging content that keeps readers informed without overwhelming them.
