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 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 stabilizing 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 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 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.
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