Economic Survey 2024: Erratic monsoon, climate change, crop diseases double food inflation in 3 years

Climate change is emerging as a key driver of high food inflation, the Economic Survey 2023-2024 has said. Union Finance Minister Nirmala Sitharaman tabled the Economic Survey 2023/24 in Parliament on July 22, a day before the Union budget is proposed to the House, as per tradition.

Food inflation, based on the Consumer Food Price Index (CFPI), has almost doubled in the last three years. “CFPI increased from 3.8 per cent in Fiscal Year (FY) 2022 to 6.6 per cent in FY2023 and further to 7.5 per cent in FY2024,” said the Survey. It attributed the spike in food prices to adverse weather conditions.

“Research indicates the rising vulnerability of food prices to climate change — heat waves, uneven monsoon distribution, unseasonal rainfall, hailstorms, torrential rainfall and historic dry conditions,” the Survey reasoned, terming the recent high food inflation as a global phenomenon.

“In FY2023 and FY2024, the agriculture sector was affected by extreme weather events, lower reservoir levels, and damaged crops that adversely affected farm output and food prices,” the Survey has found.

Vegetables and pulses, two major food items that account for a significant portion of the family food budget, have been majorly impacted by erratic weather conditions. The Survey has illustrated an unprecedented price rise in some specific vegetable to make the link between adverse weather — thus, climate change — and overall food inflation.

“The increase in tomato prices in July 2023 was caused by seasonal changes in crop production, region-specific crop diseases such as white fly infestation, and the early arrival of monsoon rains in the northern part of the country,” said the Survey.

The Survey linked high onion prices to weather conditions as well. “The spike in onion prices was due to several factors, including rainfall during the last harvesting season affecting the quality of rabi onions, delays in sowing during the kharif season, prolonged dry spells impacting kharif production, and trade-related measures taken by other countries.”

In the last two years there have been massive crop losses due to erratic and extreme weather conditions. “The prices of pulses, particularly of tur, increased due to low production over the past two years, caused by adverse weather conditions. Urad production was affected by slow sowing progress in the Rabi season coupled with climatic disturbances in the southern states,” said the Survey.

The Survey had a surprising note on the agriculture sector. In the Preface, V Anantha Nageswaran, chief economic advisor, Union Ministry of Finance, advised a turnaround on the national goal of shifting people from the farm to non-farm sector to generate employment and also ensuring economic growth. He batted for going back to the farm sector, generating more employment as well as wealth, given that there has been a reverse migration of people to the agriculture sector in recent years. He argued that there is not much scope left for employment generation in the manufacturing and services sectors.

“Earlier development models featured economies migrating from farm beginnings to industrialisation to value-added services in their development journey. Technological advancements and geopolitics are challenging this conventional wisdom. Trade protectionism, resource-hoarding, excess capacity and dumping, onshoring production and the advent of AI are narrowing the scope for countries to squeeze out growth from manufacturing and services,” Nageswaran wrote in the Preface of the Survey.

“That is forcing us to turn conventional wisdom on its head,” he argued and asked, “Can the farm sector be the saviour?”

“A return to roots, as it were, in terms of farming practices and policy making, can generate higher value addition from agriculture, boost farmers’ income, create opportunities for food processing and exports and make the farm sector both fashionable and productive for India’s urban youth,” he suggested.