Nature of Agriculture Price in India

Agriculture prices depict large fluctuations and except for few years in the beginning of planning since 1951 there has been an almost continuous uptrend in the agriculture prices. The causes of such fluctuations are as follows:

1. Dependence on Rainfall: The production of agricultural goods is more dependent upon vagaries of nature. A good rainfall results into higher production and scarce or excessive rains/floods have an adverse impact on agricultural output. The erratic natural conditions thus give rise to the sharp variations in the agricultural output supply. These variations in the output gives rise to the large price variations.

2. Low price Inelasticity of demand of Agricultural Goods: The demand for agriculture goods particularly food crops don’t change with the change in its price. The overproduction in agriculture leads to price crash as demand doesn’t increase and under production causes prices to rise as demand doesn’t fall.