Kolkata: Monsoon has arrived real quick this year in India. This year monsoons has arrived the earliest since 2009. While the monsoons arrive in Kerala almost every year in the end of the first week June, this year it has entered more than a week in advance and it has been estimated that the monsoons will not only be adequate but also could be about 5% more than the LPA (long period average). At any rate, it is highly unlikely that monsoon will be less than normal in India. The prospect of a bountiful monsoon not only holds up promise for the investor but also for the consumer. Let’s see how.
India is supposed to have a rainy season that spans four months and during this time window about 70% of the annual precipitation occurs in the country. Since India’s agriculture is critically dependent on the rains, early rains and the promise of adequate rains are extremely significant in signaling a good produce for the kharif season. Moreover, it also indicates that there will be adequate water in the key water reservoirs in the country which is important for the winter crop.
Adequate rains = lower EMIs?
Despite the apparent rhetoric, this is a significant possibility, provided there are no unforeseen factors upsetting the RBI applecart. Over the past two years, RBI has repeatedly considered whether it could go for a Repo Rate cut, which is the first step to reducing interest rates — and thereby EMIs on your loans — but was thwarted by high inflation that ranged in the 6-7% range frequently. The main obstacle was considered to be food inflation. Former RBI governor Shaktikanta Das repeatedly blamed El Nino for the surging food inflation. Food items constitute about 48% of the items of the retail inflation basket and any surge in food inflation automatically kept inflation at elevated levels.
However, this year, RBI has already started its rate cutting exercise in February and followed it up in April — both times cutting the rates by 25 basis points — and triggering a rate cutting exercise among all banks, which have brought down their lending rates. As a result interest rates on all retail loans such as auto loans, home loans and personal loans have come down. With an early and adequate monsoon, it is likely that there will be good harvest that will help in keeping food inflation down. Core inflation — the rate of inflation on all items except food and fuel — is already down and lower food inflation can keep headline rates low, that could embolden RBI to keep trimming rates again.
Inflation at a six-year low in April
It might be recalled that retail inflation in April dropped to a six-year low of 3.16% from 3.34% in March 2025. A moderation in food prices did the trick. The most significant fallout of this development is that Reserve Bank might feel emboldened to cut Repo Rate once again in the next MPC (monetary policy committee) meeting in June. The durability factor in lower inflation rates could prompt RBI to cut Repo rates again in June when the MPC sits to take a fresh look at its possibility. April was the third consecutive month when inflation remained below the RBI’s target level of 4%.
Distribution a factor too
Incidentally a SBI Research Report has forecast a 125 basis point rate cut in FY26, which can trigger a sharp drop in interest rates on a whole range of loans, triggering consumption.
However, there is one possible downside. Adequate rain is one of the conditions for moderation in food prices. Uniform distribution is also a necessary factor. If there is excessive rain in the major agri-intensive regions, a flood-like situation can destroy crops and push up prices, upsetting the RBI’s optimism. Therefore, this monsoon when you look up at the sky to enjoy the monsoon clouds, pray for a uniform distribution as well.
An early and bountiful monsoon holds promise for both the investor as well as the consumer. In India monsoons are intricately linked not only with agricultural produce but also with inflation and interest rates and also your EMIs on home loans, car loans and personal loans. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
