ICRA projects agri-GVA growth at 3.5–4.0 per cent for FY26, down from 4.6 per cent in FY25
India is set to witness a timely start to the kharif sowing season, thanks to the India Meteorological Department’s (IMD) upgraded rainfall forecast, according to a recent report by ICRA. The IMD has revised its monsoon projection to 106 per cent ± 4 per cent of the long period average (LPA), a slight increase from the earlier estimate of 105 per cent ± 5 per cent of LPA.
This improved rainfall outlook is encouraging for the sowing of kharif crops and reservoir replenishment. However, ICRA cautions that the benefits hinge on the rainfall being evenly spread both in time and geography, as heavy downpours concentrated over short periods could negatively impact standing crops.
ICRA projects agriculture Gross Value Added (GVA) growth of 3.5-4.0 per cent in FY26, a moderation from the 4.6 per cent growth estimated for FY25. The government has also raised Minimum Support Prices (MSP) for kharif crops for the 2025-26 marketing season, with increases ranging between 1 per cent and 13.9 per cent, further bolstering farmer income prospects.
With the robust output of rabi crops in FY25 generating strong farm cash flows, ICRA anticipates this positive momentum to carry into the kharif season, supported by the favorable monsoon conditions.
Regionally, the IMD expects above-normal rainfall in the South Peninsula, Central India, and the crucial rain-fed core Monsoon Zone. In contrast, North-west India is forecasted to receive normal rainfall, while the North-east may experience below-normal precipitation. Notably, some areas in the peninsular, North-west, and North-east regions could see below-average rainfall in June.
The report highlights that several sectors closely tied to agriculture and rural incomes — such as cement, tractors, two-wheelers, edible oils, and sugar — are poised to benefit from the strong monsoon. Conversely, sectors like power and room air conditioners may witness a slowdown in demand due to the higher rainfall.
An above-normal monsoon is expected to stimulate rural demand significantly, which is vital for the recovery of the two-wheeler market. The industry had faced a downturn in FY22 due to COVID-19 disruptions, rising fuel prices, and commodity inflation, but recent improvements in rural demand offer hope for sustained growth.
