By Shivaji Sarkar
The paradox within India’s food scenario, where higher agricultural yields year after year coincide with sharp spikes in inflation, demands attention beyond the realms of production, agriculture and consumer affairs ministries.While the agricultural sector is poised to grow significantly, with projections estimating its value to reach $24 billion by 2025, the simultaneous rise in food prices poses a big challenge. This inflationary trend could hinder India’s ability to compete in the global market, despite its substantial agricultural output.
India’s food and grocery market stands as the world’s sixth largest, with retail sales driving 70 percent of the sector. This robust domestic market reflects both opportunities and challenges. On one hand, increased agricultural productivity has led to notable growth in exports. In the fiscal year 2023-24 (April-December), India’s exports of agricultural and processed food products-including marine products, basmati and non-basmati rice, spices, buffalo meat, and sugar-totalled $35.18 billion. This impressive figure underscores India’s potential as a major player in the global agricultural market.
However, the rising inflation within the food sector threatens this potential. Higher domestic prices can make Indian products less competitive abroad, as international buyers seek more cost-effective alternatives. The delicate balance between maintaining high production levels and controlling inflation is critical for India to sustain and grow its presence in the world market. If the current trend of rising prices continues unchecked, the agricultural sector’s ambitious growth targets could become increasingly difficult to achieve.
The role of foreign direct investment (FDI) in supporting the agricultural sector cannot be overlooked. Between April 2000 and March 2024, the sector attracted $12.58 billion in FDI, accounting for 1.85 percent of the total FDI inflows across industries. This influx of investment has been instrumental in driving technological advancements, improving infrastructure, and enhancing productivity. However, to maintain and attract further investment, India must address the inflationary pressures that threaten to erode profit margins and market competitiveness.
Addressing this inflationary paradox requires a coordinated effort across multiple ministries and sectors. By stabilising prices, enhancing productivity, and maintaining competitiveness, India can not only achieve its ambitious growth targets but also solidify its position in the global agricultural market. The Reserve Bank of India has flagged it to put off interest rate cut.During the last six years the agriculture and allied sector has been growing at 4.4 percent per annum. Farm gross value addition (GVA) to GDP is estimated at 19 percent.
Last fiscal, food inflation, after touching a peak of 11.5 percent in July started moderating. But the relief was short-lived. Price rise stood at 5.1 percent in June. Food inflation surged to 9.4 percent in June, from an already high 8.7 percent in May. Even wholesale price index records rise of 3.36 percent for the fourth consequent month. Highest spurt, according to commerce ministry, was noticed in pulses 21.64 percent, foodgrains 9.64 percent, vegetables 38.76 percent, fruits 10.14 percent. Manufactured food products rose by 4.28 percent. Even milk has become expensive by 3.37 percent.Prices of poultry products, meat and fish marked a fall of 3.06 percent and oilseed 3.33 percent.
The kharif foodgrain production is estimated at 154.18 million tonnes, and Rabi foodgrain production is estimated at 155.16 million tonnes. Kharif rice production is estimated at 111.4 million tonnes as compared to 110.5 million tonnes. It is an increase of 9.46 lakh metric tonnes.
The government is targeting to raise fish production to 220 lakh tonnes this year though not easy for environmental reasons.
During the past 10 years the Government has implemented 13 different programmes for improving the agricultural growth prospects and incomes of the farmers, including PM-KISAN of Rs. 18000 per year; increase in minimum support price (MSPs) for all kharif &rabi crops ensuring a minimum of 50 percent of profit margin on the cost of production; crop insurance under Pradhan Mantri Fasal Bima Yojna (PMFBY); creation of infrastructure through Rs 1 lakh crore Agri Infrastructure Fund (AIF); and new procurement policy under PM-AASHA in addition to FCI operations.
These have led to higher production of vegetables envisaged to be around 209.39 MT and fruits to 112.08 MT this year. Increase is expected in production of cabbage, cauliflower, pumpkin, tapioca, tomato, banana, mangos, mandarin.Production of tomato is expected to be around 208.19 lakh tonne compared to around 204.25 lakh tonne last year. An increase but its prices are surging. Shortage is seen in onion production to 254.73 lakh tonne from last year’s 302.8 lakh tonne. Potato production would be also less than last year at 589.94 lakh tonne. The shortages lead to further rise in prices.
Despite claims of record wheat production last year, stock limits were imposed in June 2023. A good wheat harvest followed but again curbs were imposed. It is to be seen as and when Russian wheat arrives how the market reacts. A fall in prices does not appear to be a possibility.
Most agricultural products like onion or tomato or fruits face this situation. Much depends on the monsoon. Climate change is affecting yields. The heat waves delayed the sowing of kharif crops. Water levels in reservoirs are also low.
As per the third advance estimates, wheat production at 112.9 million tonnes is a record. The government procured 266 lakh tonnes of the grain, slightly higher than last year’s 262 lakh tonnes. At the same time, wheat prices are hovering around Rs 2,600 per quintal, against the minimum support price (MSP) for the current year of Rs 2,275. The central pool has 299.5 lakh tonnes as of June 1, 2024, compared to 313.8 lakh tonnes on the same day last year. The free food programme reduced central pool to 75.02 lakh tonnes, considered low.
Rapid population expansion in India is the main factor driving the industry. The rising income levels in rural and urban areas, which have contributed to an increase in the demand for agricultural products across the nation, provide additional support for this. In accordance with this, the market is being stimulated by the growing adoption of cutting-edge techniques including blockchain, artificial intelligence (AI), geographic information systems (GIS), drones, and remote sensing technologies, as well as the release of various e-farming applications.Still food inflation inflates prices of every commodity and government expenses. Concerted move to keep it in check is needed for faster growth.—INFA
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