For Bhupesh Kajla, a 40-year-old farmer from Meerut, Uttar Pradesh, the choice was stark: a new car or money to plant potatoes. After a disappointing Kharif season where excess rains damaged his premium basmati paddy, he chose the latter. "I just about managed to recover the cost of cultivation," Kajla said. His story echoes across India's heartland, where a sharp deflation in crop prices is breaking farmers' financial resilience and threatening to halt a nascent recovery in rural demand.
The Ground Reality: Broken Backs and Postponed Dreams
The optimism from a plentiful monsoon is fading fast on the ground. For Kajla, the upcoming potato harvest brings anxiety. Wholesale potato prices are around ₹600 for a 50-kg bag, just covering costs, compared to nearly double last year. With daily harvest expenses exceeding ₹25,000, a further price drop spells mounting losses. This caution led him to spend a modest ₹90,000 on farm machinery instead of the new car.
Similarly, 34-year-old Gaurav Mishra from Sitapur, Uttar Pradesh, has postponed renovating his house. His rain-damaged rice fetched around ₹1,600 per quintal, far below the government's Minimum Support Price (MSP) of ₹2,369. "It was a net loss for me," Mishra stated, highlighting the acute fertilizer shortage that forced black market purchases. This widespread income squeeze from the Kharif season and a dampened outlook for winter crops like wheat is forcing farmers to tighten their belts.
The Ripple Effect: A Warning for Consumer Companies
This farmer-level frugality sends a clear warning to companies reliant on rural India. Rural markets account for 38% of Fast-Moving Consumer Goods (FMCG) sales. While rural FMCG volume growth at 7.7% in the September 2025 quarter outpaced urban growth (3.7%), it had slowed from 8.4% in the previous quarter, as per NielsenIQ.
The hit to nominal farm incomes is stark in the GDP data. In the second quarter (July-September) of FY26, the agriculture sector grew by just 1.8% in nominal terms, a sharp fall from 7.6% a year ago. In real terms, growth was 3.5%. With farm sources contributing about 45% of agricultural household earnings, stagnant incomes directly impact household spending.
"While nominal farm incomes are stagnant, we need to note that the rural economy has other levers like direct cash transfer schemes which play a supporting role," said Dharmakirti Joshi, chief economist at Crisil. However, economist Himanshu from JNU warned, "This could be the beginning of a crisis... Rural wages have been growing modestly but if farm revenue is stagnant, wages may be impacted in coming months."
Widespread Deflation and Weather Woes
The price pain is broad-based. By end-November, wholesale prices of oilseeds like groundnut and soybean were 20% lower than MSP. Pulses like moong, tur, and urad were 25%, 10%, and 19% below MSP, respectively. Onion and potato prices were down 73% and 43% year-on-year. This deflation pulled consumer inflation to a record low of 0.25% in October, with food prices turning negative.
Adverse weather compounded the problem. The 2025 monsoon was 108% of normal, but caused floods and landslides. Extreme weather events impacted 9.5 million hectares of crop area and claimed 4,064 lives in the first nine months, according to the Centre for Science and Environment. Unseasonal October rains further damaged ready-to-harvest crops.
For Nashik onion grower Deepak Pagar, prices around ₹7 per kg fail to cover his ₹8-12 per kg production cost. "We have hit the streets several times... the government is yet to announce any support," he said, unable to repay a ₹10 lakh debt or his son's college fees. Policy decisions have added pressure. The removal of import duty on cotton, pulses, and oilseeds to ease input costs for mills has hurt domestic growers. Cotton farmer Vijay Nawal from Yavatmal gets about 16% less than MSP.
In Madhya Pradesh, farmer Abhishek Raghuvanshi's first-time maize crop was damaged by rain and wild boars. He sold the remainder for ₹935 per quintal, over 60% lower than the MSP of ₹2,400. "There is a serious glut in wholesale markets," he said, noting that even the marriage season failed to firm up prices for chana and wheat. "Whatever big ticket items farmers are purchasing is because of easy loans. No one here is buying bikes or a car on cash."
The mood on the ground, while not despondent, contradicts brokerage reports of "rural resilience." With deflation across commodities and production challenges, the remainder of the year holds the key to whether rural demand can sustain its fragile recovery or succumbs to the weight of broken backs and slim wallets.
