Rainfall deficit, fears of low crop yields, wars that refuse to end, volatile oil prices, falling stock markets, rising food inflation – if you thought the worst is over, the September numbers will force you to think again.
Retail inflation – the first blow to an average consumer – climbed to 5.54% in September, up from 4.83% in August. Food inflation jumped to 7.74% from 5.97%, driven by the unruly kitchen staple, the onion, which jumped about 108%, and further pushed by ginger, garlic and rice costs. Rural food inflation touched 8.06%, while rural headline inflation crossed 6%, the RBI’s upper comfort limit.
And it isn’t just about food. Core inflation, which excludes food and fuel but includes precious metals, rose to about 4.6%, according to ICRA. Costs are spreading, not just spiking in the vegetable aisle.
The rain deficit
Adding to the woes, the monsoon, often a barometer of a good agricultural season (which translates into a good economic sign), ended with a 12.6% deficit, the worst since 2015. June, the month that sets the tone for sowing, got just 65% of its normal rainfall, and IMD blames El Niño, which it expects to peak in November. East and Northeast India had their lowest rainfall since 1901 – 313 of 741 districts were deficient or largely deficient. Parts of several agricultural states, such as Maharashtra, Andhra Pradesh, Punjab, and Haryana, are facing extreme drought conditions.
Sowing recovered in patches, but kharif acreage is still about 1.5 million hectares below the previous year, with rice area down 3.7% currently. Reservoirs held roughly 70% of capacity in late September against a 10-year average of 76.62%, with southern India reservoirs near 50%. That makes rabi the real test, although a good northeast monsoon could help the south.
The government isn’t hitting the panic button, but is cautious. Its 2026-27 foodgrain target of 373.93 million tons is about 2.63 million tons below last year’s 376.56 million tons. Agriculture minister Shivraj Singh Chouhan expects no major kharif decline, though he concedes that five states are facing drought.
Geo-politics, money matters and side-effects
On 28 September, external affairs minister S Jaishankar warned in New York of a possible global ‘4F crisis’ covering food, fuel, fertilizer and finance, with the Global South likely to be hit hardest. He pointed to exporters struggling to ship cargos, especially through the Black Sea, and to fertilizer disruptions, since key producers sit in conflict-hit regions like West Asia and Russia.
The continued wars in the Gulf and Ukraine make the picture uncomfortable. Ukraine matters for grains and edible oils. The Gulf matters for crude, freight and fertilizer. Costlier fertilizer today means a costlier crop tomorrow, and a patchy monsoon only piles on.
On 7 October, the RBI raised the repo rate by 25 basis points to 5.50%, its first hike in nearly three years, and shifted its stance from ‘neutral’ to ‘calibrated tightening.’ It lifted its FY27 inflation projection to 5.2%, with the third quarter estimated at around 6%.
For food and packaging companies, that’s a double whammy — raw materials are dearer, and so is the working capital needed to buy them. Oil prices have also been fluctuating back and forth, forcing private oil companies in India such as Nyara and Jio to hike prices. In response to the volatility of international crude oil and petroleum product prices, the Indian government raised the windfall tax on petrol exports to Rs 2.5 per liter from Rs 0.5 per liter, while cutting the duty on diesel exports to Rs 8.5 per liter from Rs 16 per liter.
Packaging hit
Food and beverage makers feel the pinch first. Packaging sits right behind them. Polymers and resins track crude and petrochemical prices. Films, PET, inks, adhesives and coatings follow the same chain, and aluminum and paperboard are energy-hungry. Then, higher freight and insurance for cargo moving through disrupted sea lanes. The result – converters are squeezed from both ends.
Brand owners are equally affected. If grain, oil, sugar and packaging all get dearer together, margins thin out. Companies can raise prices, but consumers are already stretched. The alternative is shrinkflation: smaller packs at the same price, lighter gauges, fewer promotions.
The next few weeks will tell us a lot—how the northeast monsoon behaves, how rabi sowing shapes up, and what the 12 November CPI print says. For now, one thing is clear. The monsoon has handed us a domestic problem, and geopolitics and tighter money could make it bigger. Food and packaging, as usual, will be first in line.
