Cultivation challenge: India must liberate its farms, not just protect them

The Indian mango price story of 2025 is emblematic of the price dynamics of different types of food items in India, spanning vegetables, edible oils, cereals, fish and chicken. Overall, food prices have declined this year from the previous year, but these declines mask wider price variation among varieties and regions than before.

In July 2025, food inflation registered a decline of 1.76% year-on-year. This decline was explained by a combination of the base effect (prices in July 2024 were high) and extraordinary drops in the prices of vegetables (down by roughly 29%), pulses (about 15%) and spices (about 15%), apart from moderate but notable declines in the prices of meat, fish, eggs, cereal and sugar. 

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Take the case of fish prices in India. They typically peak during the annual ban on motorized trawlers that aims to protect juvenile fish during breeding season, prevent overfishing and reduce seabed damage from trawling nets. This ban lasts for about 60 days mid-year, though the actual period can vary from one state to the next. Tamil Nadu, Andhra Pradesh, Kerala, Gujarat, Maharashtra and Karnataka have slightly different ban periods, all between April and July. 

This year, peak prices for king fish, mackerel and pomfret rose, but then plunged by more than 50% after the trawler bans ended. In fact, there was a glut and the sharp decline in fish prices had a knock-on effect on chicken prices, which also fell significantly.

Similarly, vegetable prices contracted sharply this year. This was partly due to the base effect (last year’s poor monsoon had resulted in high prices), but also because this year’s kharif sowing (which begins in early June) exceeded last year’s acreage. The magnitude and distribution of rainfall this year has also been better than in 2024, which has helped deliver a very good crop of vegetables and pulses. An unusual factor was the large-scale impact of dietary preferences related to the Maha Kumbh mela, which is held once in 12 years. 

The dramatic shift by tens of millions of people towards a ‘phalahar’ or fruit diet for this religious festival depressed the prices of other food items. This phenomenon is unique to India and is worthy of study. 

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No one who studies food production in the country is sanguine that these benign price conditions will last. 

As extreme weather conditions are becoming more commonplace, yields are getting more volatile. Erratic rainfall and temperature conditions on land and sea significantly impact supply. In general, Indian yields are lower than those in China and the West. For instance, our average rice yield is only half of China’s and a third America’s. Vegetable and fruit yields remain lower than Chinese levels. On the demand side, export volumes, urban premiums and festive purchases create their own unpredictability. 

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Directionally speaking, the government’s pursuit of farm law reforms in 2020 was welcome. Its legislative effort sought to: (i) create a barrier-free trade environment for farmers outside the traditional Agricultural Produce Market Committee (APMC) mandi system; (ii) legalize and promote contract farming; and (iii) deregulate the storage and movement of key commodities. A lack of  consensus-building efforts put paid to those farm law reforms, but they must be attempted again. 

Without reducing the role of the ‘middleman’ and incentivizing the sector to improve its yields, Indian farm-gate prices of food will remain low and consumer-level prices volatile. While embarking on a transition, care must be taken to preserve the MSP procurement safety net that farmers count on. While producers should be free to sell their produce to a wider market, they will need to be trained and empowered to negotiate directly with large buyers. A time-bound method of addressing disputes is also an imperative. 

Agriculture is a state subject for legislation under India’s Constitution. Inter-state commerce is, however, a central subject. Even though it may not be in the fiscal interest of states in the short-term to deregulate agriculture, the time has come for progressive states to try it. This could set the template for wider acceptance and subsequent central reforms related to interstate trade. 

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India imposes 30-100% tariffs on imports of vegetable oils, pulses, fruits, vegetables and grains. Our average volume-weighted tariffs are about 32%, compared to about 7.5% for imports into the US and 15% into Europe. Our annual farm subsidy bill is only around $10 billion, while Europe’s is about $60 billion and America’s about $30 billion.

It is in the context of a still-evolving agricultural market in India that a bilateral trade agreement between the US and India is being discussed. The Narendra Modi government is correct in not compromising on the agricultural sector, but this sacrifice would be in vain if we do not improve our yields and relieve our farm sector of middlemen. Our self-reliance in agriculture must come not from imposing high import duties, but by lowering and steadying prices through better yields and reduced frictional costs of matching demand with supply. 

P.S.: “A philosophy of protectionism is a philosophy of war," said Austrian Economist Ludwig von Mises.

The author is chairman, InKlude Labs. Read Narayan’s Mint columns at www.livemint.com/avisiblehand