Why in News?

The El Niño event from April 2023 to May 2024 was both prolonged and intense, with Pacific Ocean Sea surface temperatures rising up to 2°C above the 30-year average—far exceeding the 0.5°C threshold for El Niño classification.

This strong El Niño led to deficient rainfall across much of India during the 2023-24 monsoon, post-monsoon, and winter seasons. It also delayed winter onset, caused warmer-than-normal temperatures, and triggered heat waves from late March to mid-June 2024.

As a result, 2023-24 was a below-average agricultural year, with both kharif and rabi crops performing poorly.

What’s in Today’s Article?

• Food Inflation Impact: A Chain Reaction
• Easing Pressure on Food Inflation
• Wheat Relief: A Turnaround in 2024-25
• Future Outlook: Signs of Economic Relief

Food Inflation Impact: A Chain Reaction

• The 2023-24 agricultural year was disappointing, with subpar kharif and rabi harvests due to an unusually long and strong El Niño.
• This weather anomaly disrupted rainfall patterns, directly affecting farm productivity.
• Surge in Food Prices
  • The poor crop yields triggered a sharp rise in food inflation.
  • Between July 2023 and December 2024, the consumer food price index rose by an average of over 8.5%, marking one of India’s longest food inflation spells in recent times.
• Strain on Household Budgets
  • High food prices forced households to divert a larger share of their income towards essentials, reducing their ability to spend on non-food items.
• Impact on Consumption
  • Consumer demand, especially for fast-moving consumer goods, was hit.
  • Hindustan Unilever recorded modest sales volume growth, with figures dropping to 0% by the last quarter of 2024.
• The El Niño Effect
  • El Niño’s disruption of global weather patterns reduced rainfall across India, damaging crop output, inflating food prices, and ultimately squeezing household consumption.

Easing Pressure on Food Inflation

• Retail food inflation eased significantly to 2.7% year-on-year in March 2025 — the lowest since November 2021 — offering relief after an extended period of high prices.
• Agricultural Recovery in 2024-25
  • The drop in inflation was driven by a recovery in farm output during 2024-25, supported by a favorable monsoon and the absence of disruptive weather events like El Niño.
• Mild La Niña Influence
  • While a full-fledged La Niña didn’t materialize, mild cooling of sea surface temperatures in the Pacific (–0.5 to –0.6°C during Nov–Feb) helped stabilize weather patterns.
  • This contributed to a normal winter and a healthy rabi crop.
• Improved Supply, Lower Prices
  • The improved kharif and rabi harvests began reaching markets, aligning with the softening of food inflation, bringing much-needed relief to both consumers and the economy.

Wheat Relief: A Turnaround in 2024-25

• As of April 1, 2024, government wheat stocks had fallen to 7.5 million tonnes—the lowest for that date since 2008.
• The 2023-24 wheat crop struggled in central India due to delayed winter and poor sunshine in January, while only northern regions saw good yields.
• Due to weak overall production, wheat prices remained elevated throughout 2023 and early 2024. The new marketing season also began with uncomfortable stock levels.
• Bumper Crop in 2024-25
  • This year’s wheat harvest in central India has been strong, thanks to stable weather and the absence of fog or extreme temperature swings.
  • Although yields in northern states are slightly lower than last year, national output is expected to be higher.
• Favorable Weather Aided Grain Quality
  • A cool March allowed proper grain filling.
• New High-Yielding Varieties Boost Output
  • Improved wheat varieties like HD-3386, DW-327, PBW-826, and PBW-872 played a crucial role in enhancing grain weight and overall yield, especially in Punjab and Haryana.
• Market Signals a Good Harvest
  • Prices of fair average quality wheat have dropped to ₹2,400–2,500 per quintal in MP’s markets, below the ₹3,000–3,100 range three months ago and closer to the MSP of ₹2,425 — indicating ample supply.
• Stock Rebuilding Expected
  • With strong procurement expected, wheat stocks are likely to be replenished, supplementing already high levels of rice in government granaries.

Future Outlook: Signs of Economic Relief

• The India Meteorological Department (IMD) has forecast an “above normal” southwest monsoon for June–September 2025, with rainfall expected at 105% of the long-period average.
• This is likely under ENSO-neutral conditions, with neither El Niño nor La Niña active.
• Potential for Lower Food Inflation
  • A good monsoon would support healthy agricultural production, reinforcing the recent softening of food inflation and ensuring price stability in essential commodities.
• Favorable External Factors
  • Falling global crude oil prices (Brent below $68 per barrel) and a weakening U.S. dollar (from ₹87.5 to ₹85.4) are reducing import costs and easing subsidy burdens for the Indian government.
• Positive Terms of Trade Shock
  • The combination of lower food prices, cheaper oil imports, and favorable currency movement presents a positive terms of trade shock. This benefits:
    • Households, by improving purchasing power,
    • Businesses, through reduced input costs, and
    • The Government, by lowering subsidy expenditures.
• Boost to Consumption
  • With lower inflationary pressure and improved disposable income, household consumption could see a rise.
  • This may help offset headwinds from global economic uncertainties, including disruptions from U.S. tariff actions under President Donald Trump.