El Niño poses a risk to India’s agricultural output and food economy, but the impact will depend on the location, and duration of rainfall deficits and the ability of existing supply buffers to absorb the shock, according to a white paper by Dun & Bradstreet India.
The analysis points to concentrated risks across vulnerable crops, production-intensive regions and businesses dependent on agricultural inputs, rather than an immediate nationwide food-supply crisis. Companies may face higher procurement costs, supply-chain disruptions, and increased working-capital requirements before the impact becomes visible in retail inflation.
Agriculture contributes nearly 17% of India’s gross value added (GVA), while the southwest monsoon accounts for close to three-fourths of annual precipitation. However, below-normal rainfall does not automatically translate into production losses. The economic impact depends on where deficits occur, the crop-growth stages affected and the availability of irrigation.
Lower reservoir levels, weaker sowing raise concerns
Reservoir storage is below both last year’s level and the 10-year seasonal average, reducing the water cushion for agricultural regions dependent on reservoirs and canals. Prolonged shortages could affect late-stage kharif crops and constrain water availability for the rabi season. The actual impact will depend on groundwater access, canal releases, and crop patterns.
Kharif sowing offers another early indicator of agricultural stress. As of October 5, 2026, total acreage was down 1.1% year-on-year, while foodgrain acreage declined 1.6%.
The larger concern is the potential impact on yields. Dun & Bradstreet cited the 2023-24 maize crop, when output fell 6% despite a 3.4% increase in acreage, as yields declined 9.1%. This shows how adverse weather can reduce production even when the area under cultivation expands.
Rice, maize, and ragi warrant close monitoring because their vulnerability depends on the timing and duration of moisture stress. Rice acreage was down 3.5% year-on-year as of October 5 while sustained moisture is critical through much of its growth cycle.
Public stocks offer a buffer against food inflation
Substantial public rice inventories and adequate wheat reserves could help absorb moderate production losses without immediately disrupting food availability or pushing up consumer prices. However, stocks offer temporary protection rather than eliminating the risk. Sustained production losses could deplete inventories and reduce the government’s ability to stabilise markets.
Imports can ease shortages in commodities such as lentils, where India has established sourcing channels and meaningful import dependence. Their ability to offset domestic production losses is more limited for rice, wheat, and especially maize, where domestic output and public stocks remain critical. Global availability, landed costs, trade policy, and delivery timelines will also determine how much relief imports can provide.
Food processors face early pressure on costs
Agricultural stress can become a business risk well before it translates into higher food inflation. Agriculture accounts for 57% of intermediate consumption in food products, beverages, and tobacco manufacturing, exposing processors to fluctuations in agricultural supply and prices.
Tighter supplies could raise procurement costs, increase inventory requirements and complicate logistics, while putting pressure on working capital. The impact could extend to feed, livestock, and aquaculture businesses, where agricultural inputs form a major share of production costs.
Regional concentration could amplify the risks. Dun & Bradstreet’s business database shows that Rajasthan and Maharashtra account for a significant share of cereal-related businesses. Maharashtra alone represents 21% of businesses engaged in cereal-, grain- and seed-based feed manufacturing. Andhra Pradesh and Telangana also have sizeable concentrations of rice mills and processors.
Disruptions in these clusters could trigger cost inflation, stretched payment cycles and higher counterparty risks across interconnected businesses. Companies dependent on a handful of suppliers or drought-prone regions may experience operational and financial stress before it appears in national economic data.
Businesses need to prepare for supply disruptions
Dun & Bradstreet’s assessment points to concentrated agricultural risks rather than an inevitable nationwide food-supply shock. The eventual economic cost will depend on whether rainfall deficits translate into sustained production losses and erode existing buffers.
Businesses can limit exposure by diversifying suppliers, securing alternative logistics arrangements, reviewing procurement contracts and maintaining adequate inventories of vulnerable inputs.
Final kharif production estimates, rabi sowing, reservoir levels and prices of exposed commodities will be key indicators to watch. By the time weather-related pressures appear in headline inflation, businesses may have already absorbed much of the initial cost shock.