06

The agricultural sector has been a bright spot, consistently growing by 3.5% or more in recent years, even during the pandemic. However, it remains a less dynamic sector, with productivity levels far below those of developed nations. Despite its significance, with 45% of the population relying on agriculture, a large portion of this workforce is either underemployed or forced to engage in non-farm activities for survival.

India is currently facing challenges in wheat and edible oil production. Wheat stocks are low due to poor crop yields over the last three years. Retail food inflation, although lower in November (9.04% compared to 10.87% in previous months), remains a concern, especially in vegetable prices, which have softened due to seasonal factors. The overall inflationary pressures are significant, with wheat inflation at 7.88% and edible oil inflation at 13.28%.

Maintaining Wheat Stocks and Edible Oil Shortages

India’s wheat stock has been at critical levels due to lower production in recent years. Despite efforts to expand wheat acreage, the new crop will not be available until April 2025. In the interim, the government faces challenges in procuring wheat at the Minimum Support Price (MSP). Imports, particularly from countries like Russia and Australia, could provide relief, as international prices are currently lower than domestic MSP. However, India’s high import duties on wheat (currently at 40%) pose a challenge. If the government removes or reduces these duties, wheat imports could provide a temporary solution to the shortage.

Regarding edible oils, India needs to increase its consumption of palm oil, which is cheaper and more productive than other oils like soybean and rapeseed. Palm oil accounts for 9-9.5 million tonnes of India’s annual edible oil consumption, but the import duty on edible oil is currently set at 27.5%. Reducing this duty could alleviate the ongoing edible oil shortage.

Restructuring the Agricultural Sector

To ensure long-term food security and address inflationary pressures, India must restructure its agricultural sector. Economists have repeatedly cited the lack of regular food supply as a key contributor to inflation. Unless agricultural supply chains are strengthened and more efficient, the economy will struggle to achieve its full GDP growth potential.

Rabi Crop Prospects: Optimism Despite Challenges

The Ministry of Agriculture is optimistic about the prospects for Rabi crops, as acreage has surpassed previous levels. A favorable monsoon, combined with the potential for a prolonged La Nina-induced winter, is expected to support good Rabi crop yields. However, challenges such as high October temperatures and fertilizer shortages initially hindered sowing. Despite these setbacks, conditions improved in November, raising hopes for a successful Rabi harvest.

In conclusion, while India faces challenges in several sectors, the agricultural sector holds the potential to drive growth. The government must implement targeted policies to address food inflation, restructure the agricultural sector, and support sustained growth in other key areas of the economy. A balanced approach to fiscal and monetary policy will be crucial in navigating the economic slowdown and achieving long-term growth objectives.