Amid rain worries, Finance Ministry says creating water buffers a top priority

Flagging India’s vulnerability to water shortages, the Ministry of Finance on Tuesday said building water buffers may be “at the top of the list” for policymakers. Meanwhile, the de-escalation of the West Asia conflict and lower crude oil and fertiliser prices has eased some of the pressures on the government’s finances, “allowing fiscal consolidation to proceed”.

“…the weak progress of the southwest monsoon has weighed on kharif sowing, and the monsoon rainfall deficit is a concern. Among the many things India needs to build buffers for in the coming years, water may be at the top of the list,” the finance ministry said in its Monthly Economic Review report for June.

As on June 26, the total area sown under kharif crops was 22.7% lower than the corresponding period last year, with kharif foodgrain sowing lower by 21.1%.

The India Meteorological Department (IMD) has forecast that this year’s monsoon will be 10% lower than the Long Period Average (LPA), with a 43% probability of below-normal rainfall over the Monsoon Core Zone, which covers a large part of India’s rainfed agricultural regions.

On Tuesday, data from IMD showed monsoon in June was 39.8% lower than normal at 99.5 mm, making it the fifth-driest June in 125 years. In July, the weather department expects rains to be below normal. Meanwhile, data from the Central Water Commission shows that as of June 25, storage in India’s key reservoirs was 26% of total capacity, down from 36% last year.

However, the finance ministry took comfort in reservoir storage levels being 5.7% above normal, which it said provides a “safe buffer for irrigation”.

According to the finance ministry, the West Asia conflict highlighted the need for a national policy on buffer stocks for a variety of critical raw materials and inputs. Now, water has become one of them, with rainfall patterns becoming increasingly unpredictable.

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“Among other things, water conservation, including recycling, utilisation of budgetary allocations for Jal Jeevan Mission, may now be at the top of the policy priority list,” the ministry’s report said.

For 2025-26, the Centre’s budget estimate for the Jal Jeevan Mission was Rs 67,000 crore. However, this was cut to just Rs 17,000 crore in the revised estimate. In 2026-27, the government expects to spend Rs 67,670 crore on the scheme.

The finance ministry added the war and the sub-par rains “also underscore the need to reorient India’s agricultural pricing policies to incentivise the cultivation of climate-resilient crops and disincentivise water intensive ones”.

“The steady stream of destabilising events and developments globally and climatically is a reminder of the challenges likely to arise in the coming years and the need for policy to stay a step ahead of them,” it further said.

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In its monthly report for May, the finance ministry had said a significant rainfall deficit could lead to higher food inflation, which may weaken rural demand. The report for June, released on Tuesday, did not comment on the rural economy, only saying that rural demand remained broad-based in May as evidenced in strong growth across passenger vehicles, commercial vehicles, three-wheelers, and tractors – although there was a moderation in sales on a month-on-month basis in both urban and rural areas, “signalling a softening in momentum”.

“Overall, the economy continues to exhibit resilience, although emerging signs of moderation in industrial activity, along with evolving inflationary pressures, demand closer attention ahead,” it said.

India’s GDP grew by 7.7% in 2025-26, with the Reserve Bank of India predicting it will decline to 6.6% in 2026-27.