Rural Crisis: How Unseasonal Rains and Price Collapse Crush Farmer Incomes

The report highlighted that cultivation income in rural India is "seeing a collapse", with pan-India rural checks confirming that unseasonal rains have damaged crops and depressed Kharif prices, weakening farmer earnings and dampening overall rural sentiment.

It stated, "Cultivation income in rural India seeing a collapse. Our pan-India rural checks confirm unseasonal rains led crop damages and depressed Kharif crop prices are shrinking cultivation income".

According to the report, income realization for paddy farmers in the top three paddy-growing states -- West Bengal, Uttar Pradesh and Chhattisgarh -- net cultivation income has fallen by around 10 per cent in FY26. This marks the weakest income performance since the COVID-19 period.

The report noted that although several state-level cash transfer schemes, free power programmes and steady real rural wages are providing some cushion, the widespread crop losses and "unprecedented collapse in prices" are raising concerns about sustaining strong rural demand in the coming months.

During the CY25 Kharif season, mostly harvested in October-November, farmers struggled with prices falling sharply below the minimum support prices (MSP) for most major crops.

The decline was driven by excess monsoon rainfall, delayed harvests, bunched-up arrivals, quality issues, and limited government intervention in the market.

The report also pointed out that duty-free imports of key crops like cotton, tur and urad, along with the cut in basic customs duty on crude palm, soy and sunflower oils from 20 per cent to 10 per cent, have further dragged mandi prices.

Expectations of imports from the US under the likely India-US trade deal have also kept prices of crops like maize and soyabean under pressure.

Mandi data shows that as of November 2025, prices were significantly below MSP levels -- black gram by 19 per cent, cotton by 8 per cent, soyabean by 18 per cent and maize by 27 per cent.

On the policy front, the report highlighted that central government rural spending has moderated this year. Between April and October, only 45 per cent of the rural development budget was utilised, compared to 52 per cent during the same period last year.

With moderating tax revenue and lower nominal GDP growth than budgeted, the report stated that rural spending is unlikely to pick up meaningfully in the near term.

- ANI