This year, India expects its third consecutive normal monsoon, brightening the prospects for the country’s agricultural sector. However, it may be too early for consumers to expect relief on the inflation front.
The India Meteorological Department has forecasted 97% of the long-term annual average rainfall across almost all regions of the country this year.
“Good rains in central India should boost production of pulses, oilseeds, and cotton, given this region accounts for 50-60% of national production. Good rains in the northwest should be a positive for sugarcane,” said a spokesman.
In the normal course, this would imply lower food prices. However, a string of factors could spoil the party and ruin the spirits.
Central government had promised to double farmers’ income but has achieved little in its four years in power. Agricultural distress has stubbornly refused to subside.
“In the last four years, the level of real agricultural GDP (gross domestic product) and real agriculture revenues have remained constant,” India’s latest annual economic survey said. While the country’s crop production has hit record levels, farmers’ livelihoods have not improved due to a variety of reasons, the most major being the Reserve Bank of India’s hawkish attitude on inflation.
Moreover, another of the government’s thrust areas is exports. The annual budget had proposed to liberalise the export of agricultural commodities and set an annual export target of $100 billion, more than thrice the current value of $30 billion. That translates into lesser supply at home.
Thirdly, the expected agricultural recovery will boost rural consumption and demand, which may further limit the fall in food prices despite better supply.