Bad Monsoon, No Safety Net: India’s Farmers Are Running Out Of Relief

By Prasanna Mohanty

What?

As India recovers from the worst monsoon seen in years, and the El Niño continues to intensify, more than half of the country’s geographical area is now facing drought-like conditions. This is bringing deep distress in the rural economy as farm incomes and food prices are under threat. 

On the other hand, the rural employment programme meant to cushion such shocks is providing fewer jobs.

The India Drought Monitor of IIT Gandhinagar said on September 23 that 51.2% of India’s geographical area was “abnormally dry or worse (moderate to exceptional drought)” — up from 46% on September 2. The worst-affected regions were the West, at 82%, followed by the Northeast at 64%, the South at 56% and the North at 46%.

The drought has already spread across some of India’s biggest agricultural states. Maharashtra has declared 265 of 358 tehsils drought-hit. 

Why It Matters

This has created a risk for rural India greater than the headline rainfall deficit alone suggests.  Crops can be sown and still fail after prolonged dry spells, while depleted soil moisture and reservoirs leave less of a buffer for the months ahead.

And unlike during previous El Niño-linked droughts, the rural income cushion is already under pressure.

India's rural economy is facing a three-way hit of damaged crops, fewer safety-net jobs and rising prices, with another uncertain harvest ahead.

Sajal Kulkarni, director of the Centre for People's Collective for Revitalizing Rainfed Agriculture Network, said Maharashtra’s Marathwada and Vidarbha regions face 70-80% crop loss, with overall loss of around 60% across the state. These regions have recorded rainfall deficits of 38% and 27%, respectively.

“Farmers are selling goats and sheep in distress as they have run out of cash and the VB-G RAM G work is erratic”, Kulkarni told The Core. 

Between June 1 and September 28, Punjab recorded a 42% rainfall deficit, Bihar 31%, Karnataka 30%, Kerala 27%, Haryana 25%, Andhra Pradesh 24%, Rajasthan 22%, Tamil Nadu 20%, Maharashtra 19% and Telangana 17%. The national deficit was 12%.

Beyond Crop Losses 

If the Reserve Bank of India’s latest report is to be believed, the Indian economy is “decoupled” from monsoon shocks because incomes are becoming less dependent on monsoons. 

On the ground, the reality seems to be different. 

Previous droughts saw the rural job programme scaled up as farm incomes came under pressure. In 2009, when a strong El Niño produced a drought affecting 52% of India’s geographical area, MGNREGS was expanded to provide an income back-up. In 2015, higher allocations and days of work under MGNREGS reached a five-year peak.

This time, the employment cushion is moving in the opposite direction.

The damage is not confined to farm incomes. The rural economy also must contend with rising inflation along with crop loss. 

Rural inflation rose from 4.84% in July to 5.23% in August, while rural food inflation rose from 5.79% to 6.13%. Both were higher than urban inflation, where general inflation was 4.31% and food inflation was 5.6% in August.

September data are still awaited, but milk, sugar and onion prices remain elevated, while multiple industry reports suggest FMCG prices could rise because of higher semiconductor chip prices.

Discover laptops with built-in intelligence.

Shift your workforce into hyper-productivity mode with Dell Pro laptops powered by Intel® Core™ Ultra with Intel vPro®. Shop on Dell Premier.

Explore More

Rs 38,307 crore

That’s how much money flowed into equity mutual funds in September, equivalent to about $4 billion, marking a five-month high, according to data published by the Association of Mutual Funds in India (AMFI).

The surge came even as foreign portfolio investors (FPIs) continued to pull money out of Indian equities. They withdrew approximately $3.75 billion in September and a further $4.6 billion in October so far. Their total net equity outflows for 2026 have crossed $31 billion.

The divergence highlights how domestic investors continue to put money into the market even as overseas investors turn cautious.

Fast Facts: Equity mutual fund inflows rose 30.6% from August. Small-cap funds attracted the highest inflows at Rs 9,039 crore, followed by mid-cap funds at Rs 7,835 crore and flexi-cap funds at Rs 6,702 crore. Large-cap funds also returned to positive territory, attracting Rs 860 crore after two consecutive months of outflows.

Monthly contributions through systematic investment plans (SIPs), which allow investors to invest a fixed amount regularly, hit a record Rs 32,490 crore, or about $3.4 billion, in September.

Outcome: Despite the inflows, equity mutual fund assets under management (AUM) fell 4.3% month-on-month to Rs 37.54 lakh crore, as market losses outweighed fresh investments.

“The fall in AUM largely reflected mark-to-market losses rather than investor redemptions,” said Vineet Jain, senior director at CareEdge Ratings, adding that demand for equity funds remained firm.

The broader mutual fund industry recorded net outflows of Rs 1.33 lakh crore in September, largely driven by quarter-end withdrawals from debt-oriented schemes.

Opposition Takes Voter Row To SC

Led by Rahul Gandhi and Priyanka Gandhi Vadra, opposition leaders from the INDIA Bloc marched towards the Supreme Court on Monday, demanding a halt to the Special Intensive Revision (SIR) of electoral rolls and the resignation of Chief Election Commissioner Gyanesh Kumar. The Congress-led march included leaders from parties such as the Trinamool Congress and Samajwadi Party, The Indian Express reported.

The Supreme Court had earlier declined the Congress’s request for a meeting with Chief Justice of India Surya Kant, who said pending cases could not be discussed administratively. Rahul Gandhi and other opposition leaders subsequently submitted a petition challenging the voter-list revision.

Context: The march follows days of protests led separately by the Cockroach Janta Party (CJP), a youth-led protest movement, alleging irregularities in the voter-list revision. The Election Commission has denied political bias.

Future: The Supreme Court is expected to consider the matter further, while CJP leaders have vowed to continue their agitation. On Sunday, the court directed authorities to ease movement restrictions and protect peaceful protesters’ rights.

Retail Inflation Hits 2026 High

India's retail inflation rose to 5.54% in September, from 4.83% in August, a 23-month high. This was because of a sharp jump in food prices, marking the highest inflation reading of 2026, according to data released by MoSPI on Monday.

By The Numbers: Food inflation, measured by the Consumer Food Price Index, jumped to 7.74% in September from 5.97% in August, an increase of 1.77 percentage points.

Headline inflation has risen every month since January, when it stood at 2.74%.

Among food items, ginger inflation stood at 62.85%, garlic at 54.62% and lemon at 36.41%.

Silver jewellery recorded inflation of 87.80%, down from 106.81% in August. Rural inflation rose to 6.08% from 5.24% in August, while urban inflation increased to 4.88% from 4.31%.

Fast Facts: The gap between rural and urban inflation widened to 1.20 percentage points in September from 0.93 percentage points in August.

Among major CPI divisions, personal care and miscellaneous goods saw 13.75% inflation, restaurants and accommodation 9.36%, and transport 5.01%.

Tamil Nadu recorded the highest headline inflation among major states at 6.81%.

Stellantis, Tata Pact Goes Global

Automakers Stellantis and Tata Motors Passenger Vehicles (TMPV) will jointly develop cars for more than 50 international markets and build them in India, the companies announced on Monday. The agreement builds on a partnership of over 20 years that has so far focused on making cars at Fiat India Automobiles, their 50:50 joint venture.

Catch Up Quick: The agreement follows a February pact to explore working together on manufacturing, engineering and supply chains. It now goes beyond production into car development.

Why It Matters: This way, Stellantis could spend less on development and add a new model by using Tata’s platform and suppliers. Tata could share platform costs across more vehicles, and suppliers could also gain from larger orders for common parts.

The deal also shows India’s growing role as a base for engineering, product development and exports. Automakers increasingly see the world’s third-largest car market as a strategic hub.

Setup: “This Agreement marks an important next step, extending our relationship into advanced vehicle technology and architecture,” said Shailesh Chandra, MD and CEO of TMPV. Tianshu Xin, COO of Stellantis Asia-Pacific, said it would help develop competitive vehicles in India and expand export potential.

India Wastes Solar Amid Shortages

Factories, farms and homes across India are facing power cuts and higher energy costs because coal stocks at power plants are running low. A weak monsoon reduced hydropower, and hot weather raised demand, so coal plants have been burning through their fuel quickly. By October 10, almost half of India’s coal plants had less than a quarter of the feedstock they needed, the power ministry said.

The Lead: The grid fell short by nearly 4 gigawatts a day in early October. Small steel mills in Chhattisgarh lose power for 10 to 12 hours a day, and Punjab businesses are paying more to run back-up generators. Large factories that make their own power are also struggling, because Coal India is sending coal to grid-connected plants first, Bloomberg reported.

Critical Moment: Even so, India could not use nearly 1.8 billion units of renewable power in July and August. That was about 4.2% of its solar output, which the grid could not carry because transmission lines are weak, said the Centre for Research on Energy and Clean Air. Coal still provided about two-thirds of India’s electricity, even as the country aims for 500 GW of clean power capacity by 2030, up from 304 GW now.

When your support agent gets it wrong, who's accountable?

Every agent handling refunds, account changes, or tickets needs three answers: what it can pick up, what it's allowed to do, and when it hands back. Running Agents in Customer Work is four conversations on agentic AI in customer ops. Register now, four Tuesdays, 10 a.m. PT.

Register now

Large Caps Continue To Take A Beating

On Episode 1003 of The Core Report, financial journalist Govindraj Ethiraj talks to Aditi Nayar, Chief Economist at ICRA Ratings as well as Anindya Banerjee, Head of Research at Kotak Neo.

• Large Caps Continue To Take A Beating, Reliance Hits 18-Month Low

• Why Inflation Is Nearing A 2-Year High

• Mutual Fund Inflows Hit Fresh Records

• Why China’s Gold Strategy Is Important To Note

• Is The RBI’s Strategy Of Reducing Speculation On The Rupee Working?

• The Latest Nobel Prize For Economics Goes To…