By Rakesh Joshi. Executive Editor, Business India

In the year leading up to the 2024 Lok Sabha election, the Modi government is confronted with the spectre of damage to standing crops dues to unseasonal rains which have hit a number of states. Some reports even suggest that the production of fruits and vegetables may decline by nearly 30 per cent. The unseasonal rains and hailstorms at various places have come in the wake of the heat waves which were discernible in February.

This has happened when the country was on track to achieve its target of 112 million tonnes of wheat this year. Besides wheat, mustard, chana, barley and other vegetable crops have been impacted.

Punjab seems to have been hit harder than other states. The flattened crops that one sees in the fields on either side of the road from Gurugram as one drives onwards into Haryana tell a frightening tale of the destruction caused by rains. The food industry fears that this could lead to price hikes, setting in motion the food inflation spiral.

While the government says it is still assessing the extent of damage to the rabi crop, especially to wheat, which is grown on almost 34 million hectares across the country, private players have begun putting out estimates. “The weather has been turbulent this year,” says Tarun Arora, director, IG International, a vertically integrated fresh fruit importer. “It has been bad and we are looking at a significant drop (in production). Overall, it is going to be down.” He predicted that there could be a 15 per cent price increase in the next 8-9 weeks, based on the significant price hikes that have been witnessed in the last six weeks.

Consumers bear the brunt

“Prices over the last six weeks have seen a significant increase,” Arora adds. “The increase was there but it was not as significant as we have seen in the last six weeks. We see this continuing because the overall supply over the next quarter seems to be getting more scarce than what we have seen previously. So, I think the prices will move up and we could look at a good amount of increase even from here over the next quarter for fruits”.

As businesses struggle to keep up with these increased costs, consumers are likely to bear the brunt of the price hikes. This is a prospect which any ruling party will not like. 

Corroborating the damage claims, Abneesh Roy, ED, institutional equities, Edelweiss Securities, says that the wheat crop may see lower output due to unseasonal rains, and this is likely to have a negative impact on food companies. Last year also, wheat crops suffered because of a very high temperature. This time, the reason is different but there is damage nevertheless. However, Roy also noted that it is too early to predict the full impact of the unseasonal rains and that one needs to wait for the data to come in.

Roy also opined that he did not see a big impact of these unseasonal rains, implying that it is unlikely to have a significant impact on the overall economy. This view may provide some comfort to investors who may have been concerned about the impact of the weather on the markets. However, an event like El Nino, which is a key monitorable, can put rural recovery at risk, he feels.