Farm incomes in India are likely to improve this year as high inflation amid the supply chain crunch from the Ukraine war could help farmers fetch higher prices for their produce, experts said. Prices of food items such as wheat, cereals, milk, and edible oil have jumped over the last two years, and this has been reflected in the CPI, WPI inflation prints. “The wholesale price index for primary food articles was 25-30 per cent higher than the overall WPI in the past three years,” according to the Centre for Monitoring Indian Economy (CMIE).

“In March 2022, 14.9 per cent of farmer-households said that their incomes were better than they were a year ago, 23.2 per cent said their incomes were worse off the rest said it was the same as a year ago. Similar proportions apply to expectations of household incomes a year into the future,” CMIE said.

Monsoon, Ukraine war, higher MSP: triple drivers of farm income

In 2022, economists are upbeat on improved farm incomes as they expect farmers to benefit from MSP (minimum support prices), normal monsoon and elevated food prices due to the ongoing conflict in Black Sea region.

“Going ahead, apart from rainfall, MSP prices ensure remunerative prices to farmers. This will be awaited as this will incentivize the growers and will translate into higher income. Further, the food basket carries the weight of 45.7% in CPI, hence rainfall plays an integral role in terms of inflation print. Moreover, with the ongoing geopolitical tensions and supply chain disruption there is likelihood of acceleration in overall prices led by entrenched price pressure. It remains to be seen how this will impact the Kharif crops,” according to a Bank of Baroda’s economic research note.

“In 2022, India will record the fifth consecutive year of bumper wheat crop. The crop goes into harvest during April-May. Government procurement has continued to increase and so has the minimum support price. The Russia-Ukraine war has raised global prices to a point where they stand at twice their year-ago level. As the war threatens to be prolonged the price is expected to remain elevated,” CMIE said. “Farmer sentiments have several good reasons to continue to remain upbeat,” it added.

Migration back to farm jobs

According to a survey conducted by CMIE, there has been a large migration of workers towards agriculture in recent years. Farmers have benefitted from rising prices for their bumper crops and favourable terms of trade, it added. Over the past three years, agriculture has added 11 million jobs while the rest of the economy lost 15 million, CMIE said. “Agriculture was not just a safe haven, it was also a prosperous one,” it added.

Over the last two years the share of agriculture has improved in overall GDP and the sector remained resilient despite the hit from COVID-19 pandemic. In FY 2021 the share of agriculture in overall GDP rose to 20 per cent, the levels that were last seen in FY 2004, according to the latest Economic Survey. Agriculture was the largest employer of workforce in India, the survey added.