India’s biggest economic risks are arriving together
2026 is turning out to be a case of when it rains, it pours.
Every few years, the Pacific Ocean warms up abnormally, and that phenomenon is called El Niño. When it happens, India’s monsoon weakens. This year, it looks like a super El Niño is developing, and the IMD is already forecasting rainfall 6% below normal for 2026.
It may not sound like much, but remember, 70% of India’s annual rainfall comes from the monsoon, and 60% of farmers depend entirely on it. If history is any guide, we may have a terrible year ahead. In 60% of El Niño years since 1951, India has seen below-average rain. In 2009, rainfall fell to just 78% of normal, the worst in 37 years.
A weak monsoon means weaker harvests, and weaker harvests mean higher food prices and higher inflation. Food is one of the biggest expenses in a household budget. This is now layering on top of the unholy mess created by the closure of the Strait of Hormuz.
Trump’s war with Iran has effectively shut a channel that carries 20% of the world’s oil and 20% of its LNG. India imports 80 to 90% of its oil and 40 to 50% of its gas, and we are already seeing steady price hikes and WFH advisories going out around the world. The Indian crude basket averaged $114 in April and is at $106 in May — still far above comfortable levels, and this crisis may drag on for longer.
When food and energy prices rise together, the RBI cannot stay quiet. Beyond a point, it will have to start hiking rates, and that is when a bad situation starts to feel like a crisis.
It’s still May😬
Check out this Varsity post for more.