New Delhi [India], August 4 (ANI): While temporary supply-side pressures may keep food inflation elevated in the near term, the broader economic impact of the delayed monsoon is unlikely, as per a report by Bajaj Asset Management Limited.

The report noted that rainfall improved significantly in the last week of June and remained strong through July. Additionally, reservoir levels are comfortable, with most river basins at or above their long-term averages. India's food grain stocks are also around five times the prescribed buffer level, providing a cushion to contain cereal inflation.

Apart from this, India's rural demand remains resilient, with tractor sales rising 19 per cent year-on-year in May, agricultural credit growth accelerating to nearly 15 per cent, and high non-farm income supporting household consumption despite delays in sowing.

Due to these factors, inflation is expected to rise from its recent lows. 'With CPI inflation estimated to average 5-5.5 per cent in FY27, likely driven largely by temporary pressures on food supply, however, it noted, 'underlying inflation remains contained.'

The report further highlighted that historically a weak monsoon start does not necessarily determine the season's outcome. It noted that despite June 2026 being among India's driest in over a century, rainfall in July-September will be key.

As per the report, 'consecutive years of deficient rainfall generally have a more significant impact on farm incomes, rural consumption and economic growth than a single delayed monsoon.'

Stable policy rates could help anchor bond yields, while a recovery in rural demand may benefit agricultural inputs, farm equipment, rural-focused automakers and consumer staples.

Stronger rural consumption could also improve market sentiment, which has been weighed down by geopolitical uncertainty and higher crude oil prices.

'If rainfall maintains its momentum through August and September, concerns over a deficient monsoon could ease, with 2026 ultimately seen as a delayed but recovering monsoon year,' it said. (ANI)