New Delhi, May 4 India's agriculture sector is better protected from the impact of El Niño this year, owing to several factors such as diversified income sources and improved irrigation coverage, a report has said.
The report by Elara Capital noted that while concerns over El Niño's effect on agricultural output, inflation and rural demand remain valid, structural changes in rural India have significantly weakened its transmission to farm growth and incomes.
Moreover, factors such as expanded irrigation coverage, crop and income diversification, higher minimum support prices (MSP), improved credit penetration and rising non-farm rural earnings have collectively strengthened resilience in the farm sector, it said.
Reservoir levels across rural India remain supportive, aided by two consecutive years of above-normal monsoon rainfall, which is expected to cushion any near-term weather-related shocks.
The timing of a potential strong El Niño event, likely to peak after the main sowing season, may also limit damage to summer crops.
The National Oceanic and Atmospheric Administration (NOAA) has assigned up to a 70 per cent probability of El Niño developing between June and August 2026, with a one-in-four chance of it turning into a strong event lasting through the end of the year.
Meanwhile, the India Meteorological Department (IMD) has forecast monsoon rainfall at 92 per cent of the long-period average (LPA), with a 35 per cent probability of rainfall falling below 90 per cent of LPA.
The report highlighted that the historical relationship between El Niño events and agricultural gross value added (GVA) has weakened over time.
While most El Niño episodes between 1982 and 2002 negatively impacted farm growth, only a handful of instances since 2004 have shown similar effects despite comparable rainfall shortfalls, it added.
Rural income diversification has further reduced vulnerability, with agriculture now contributing roughly one-third of household income, supplemented by wages, non-farm businesses, salaried employment and livestock earnings.
The report also flagged rising use of gold loans in rural and semi-urban areas as a financial buffer, helping households manage liquidity during periods of stress.
Crucially, past El Niño episodes have not significantly dented rural demand, with sectors such as two-wheelers, fertilisers and fast-moving consumer goods (FMCG) showing resilience during such periods.
El Niño is a periodic climate pattern that typically brings weaker monsoon rains to countries such as India, while triggering heavy rainfall in parts of South America.
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