Agriculture crisis: Why the next six-month period is critical for India
Finance Ministry flags rising fertiliser prices, supply risks and below-normal monsoon outlook, warning of potential impact on kharif output and inflation
India’s agriculture sector faces a growing concern as escalating Middle East tensions following the US-Israel attack on Iran could trigger fertiliser shortages in the country, potentially impacting crop production, while an El Niño-driven below-normal monsoon this year may further weigh on kharif output.
Fertiliser shortage concerns in India
The West Asia crisis is having a major impact on India’s industrial growth, particularly the fertiliser sector, which has been among the worst affected. Disruptions in the supply of gas and chemicals have led to stress in fertiliser production.
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The Finance Ministry has stated that current fertiliser stocks are sufficient for the kharif season, but if tensions in West Asia persist for a prolonged period, India could face a fertiliser shortage during the rabi season.
Surge in urea and ammonia prices
The Department of Economic Affairs (DEA) under the Finance Ministry released its Monthly Economic Review for April 2026, highlighting several worrying trends. According to the report, prices of key commodities have surged sharply due to the crisis.
Urea prices have risen from $390 to $950 per tonne over the past year, while ammonia prices have increased from $365 to $775 per tonne. Sulphur prices have jumped by 157%. The Index of Eight Core Industries (ICI) declined by 0.4% in March 2026, with fertiliser production witnessing a steep fall of 24.6% due to gas supply shortages.
India reliant on Gulf for fertilisers
The Finance Ministry report also noted that prolonged shortages of energy and fertilisers could worsen the situation. India relies heavily not just on oil, but also on Gulf countries for fertilisers and other essential commodities. The ongoing West Asia tensions are clearly straining global supply chains. Port traffic grew by just 0.7% in March 2026, while ship movement declined by 40.6% by April.
Below-normal monsoon expected
The monthly economic review also warned that below-normal monsoon rainfall this year could impact agricultural production. Due to El Nino, the southwest monsoon is expected to be weaker than usual, with lower rainfall forecast across most regions. This could lead to higher inflation, a wider fiscal deficit, and an increased trade deficit, while slowing economic growth.
According to the Finance Ministry, oil and gas production infrastructure in the Middle East has suffered significant damage, and rebuilding it could take several months. If kharif crop output is also affected, inflationary pressures may rise further.
Petrol, diesel price hike likely
The Finance Ministry has also flagged concerns over rising crude oil prices. The report noted that while some countries have passed on the burden of higher oil prices to consumers, others have delayed doing so, but this may not be sustainable in the long run. India is among those countries.
Despite a sharp rise in crude oil prices, the government reduced excise duty to provide relief to oil companies but did not pass on the burden to consumers. However, according to the Finance Ministry, a hike in petrol and diesel prices in India may be unavoidable. India’s average crude oil basket price rose from $113 per barrel in March to $115 per barrel in April.
Crude oil prices likely to remain high
Citing the IMF’s World Economic Outlook (April 2026), the Finance Ministry noted that crude oil prices could rise sharply. If tensions in West Asia are short-lived, average crude prices in 2026 may remain around $82 per barrel.
Also read | China suspends urea, fertiliser exports; rabi season prices to rise
However, if tensions persist for a longer duration, prices could average $100 per barrel for the year. If disruptions continue into next year, crude prices could rise to an average of $110 per barrel. For comparison, the average crude price in 2025 was $67.74 per barrel. The Finance Ministry warned that balancing inflation and economic growth could become increasingly difficult, especially for countries dependent on fuel imports.
(This article was originally published in The Federal Desh.)
