Recently, the agriculture ministry projected record foodgrain output for 2024-25 kharif season, raising hopes of a rebound in the farm economy. But MSP operations remain subdued for crops other than paddy, and the terms of trade continue to be titled against farmers in most cases. Sandip Das explains whether the odds favour a revival of farmers’ income
Fingers crossed for higher farm sector growth
After staying strong for a few years, gross value added (GVA) growth in agriculture and allied sectors had plunged to just 1.4% in 2023-24 because of patchy monsoon rains leading to a fall in output of pulses and other horticultural crops. In the first quarter of FY25, the farm economy grew 2% compared with 3.7% a year ago. Economists have pegged the GVA growth for agriculture at 3-3.2% in the current fiscal.
As per the first advance estimates, foodgrain production will likely reach a record level of 164.7 million tonne (MT) in the 2024-25 kharif season, with year-on-year increase of 5.4%. Though this has the potential to boost GVA growth in agriculture and allied sectors, raise farm incomes and push up rural consumption, a lot will depend on price realisation by farmers. Minimum support prices (MSP) purchases will have to be stepped up for pulses and oil seeds, from very low levels now. While domestic prices of edible oils have risen after the recent hike in import duty, farmers of soyabean and other oilseeds are left in the lurch, as the profits are cornered by the trade in the absence of MSP operations.
What about rabi crops?
Acreage in the rabi (winter) season for wheat, mustard and chana is set to rise taking advantage of high soil moisture due to above normal rainfall during June-September. The rabi sowing, which has just started, is expected to be robust. Overall precipitation during these four months, during which the country gets more than 70% of its annual rainfall, was 8% above the benchmark figure. In addition, surplus rainfall has ensured that the country’s 155 key reservoirs are filled up to 86% of their capacities, which is 25% more than a year ago. If the weather pattern holds good near harvesting times in March and April, higher grain output can be expected which, in turn, would bring down prices of agricultural commodities.
Oilseeds & pulses imports to fall
The agricultural ministry has announced purchase of oilseeds such as soybean and mustard at MSP. Oilseeds production projection for the 2024-25 crop year (kharif and rabi seasons) is 44.75 MT, 13% higher compared to 39.66 MT in the previous year. In September, the government had hiked import duty on edible oil – palm, soybean and sunflower – by 20%. Trade body Solvent Extractors’ Association of India has said imports of edible oils are likely fall to 15 MT in 2024-2025 oil year (November-October) against 16 MT in 2023-2024, on record output of oilseed crops. India meets around 58% of its edible oils demand via imports.
Import of pulses may also fall with higher output prospects. The output of chana, which constitutes 50% of India’s pulses production, is estimated at 13.65 MT, 24% more than 11.03 MT in the 2023-24 crop year. Last year, the chana crop was hit by adverse weather conditions forcing the government to relax import duties on yellow peas and desi chana, used as a substitute of the key pulses variety.
Impact on food inflation and prices
Rural consumption is also a function of inflation. There are concerns about a recent uptick in food prices despite the government setting a record foodgrain production target of 341.55 MT in the 2024-25 crop year. Retail inflation, based on the Consumer Price Index (CPI), surged to a 14-month high of 6.21% in October 2024, driven by a sharp rise in food prices. The Consumer Food Price Index (CFPI), the index of food inflation, came in at 10.87% (provisional) for October and the corresponding inflation rate for rural and urban stood at 10.69% and 11.09%, respectively. High food inflation in October was mainly due to rise in the prices of vegetables, fruits and oils and fats. Food prices have a share of close to 50% in the CPI.
Production of rice, the biggest kharif crop, is likely to touch 119.93 MT in the ongoing kharif season (2024-25) with overall output in the current crop year likely to touch a record 136.3 MT. Wheat production is projected at a record 115 MT in the current crop year. This would ensure adequate domestic supplies, stability in prices and India may not need to resort to import of critical rabi crops.
Erratic weather patterns remain a threat
While the data on the kharif crops which are currently being harvested look promising, erratic weather in the coming months could affect the rabi yield. In 2022 and 2023, heat waves and surplus rains prior to the harvesting of wheat in March had significantly impacted crop yield. The agriculture ministry has stated that more than 60% of the wheat seed varieties this year are climate resilient, which gives reason for hope. Erratic weather phenomena like excessive rainfall in a short span of time and heat waves have also impacted yield of several horticultural crops like onion, tomato and vegetables leading to volatility in prices.
A Reserve Bank of India (RBI) bulletin in August, 2024 had flagged how climate change is fuelling a hike in food prices. It had said that in recent decades, climate events have become the dominant reason for rise in food prices.