By 2027, food and beverage prices in India could increase significantly. This alert has been issued by multinational financial services firm JP Morgan. According to the report, the burden of subsidies worth ₹3 lakh crore will increase on the Indian government.
The firm has claimed that inflation will impact the entire world. This crisis will deepen due to fertilizer shortage, geopolitical tensions along with the arrival of an El NiNo storm.
In the first half of 2027, food and beverage prices at the global level could increase by up to 5%. In the first half of 2026, this figure was at 2.8%. This warning is more significant for India because fertilizers are already quite expensive in the country.
Crisis of fertilizer and gas due to tension in Iran
- Role of the Middle East: 42% of the world’s urea and 27% of ammonia (chemical used to make fertilizer) comes from the Middle East, i.e., Arab countries. If supply is disrupted there due to war or tension, there will be a severe shortage of fertilizer worldwide and prices will skyrocket.
- Gas Prices: Natural gas is used the most in making fertilizers like urea. If gas becomes expensive, then making fertilizer will also become costly. When fertilizer becomes expensive, farmers will use less of it, which will reduce crop yields.
- Recovery Will Take a Long Time: If fertilizer factories or gas plants are once closed or affected due to this crisis, it can take a long time of 1 to 5 years for them to fully recover again.
Burden of fertilizer subsidy on government treasury will increase
- ₹266 for a bag of urea: India is one of the countries that buys the most urea in the world. The price of a 45 kg bag of urea in the country is only ₹266.50, while the government purchases it from foreign countries at more than ten times this price.
- ₹3 lakh crore expenditure: The government bears the entire cost of this large difference, which is called ‘fertilizer subsidy’. According to officials, this subsidy expenditure of the government may exceed ₹3 lakh crore this year.
- Major challenge before the government: If the Middle East crisis prolongs, this expenditure will increase further. In such a situation, the government will face a major dilemma – either it bears heavy losses from its own pocket to keep fertilizer cheap, or asks farmers to reduce fertilizer usage which could affect crop production.
Super El Nio storm feared by end of 2026
- 81% Chance: Along with fertilizer shortage, weather is also going to become a major problem. JP Morgan estimates there is an 81% probability of a very dangerous super El Nino arriving by the end of 2026, which could extend until 2027.
- Impact on Crops: History is witness that whenever El Nino arrives, farming and agriculture suffer due to hot and adverse weather conditions, and crop yields decline by an average of 3.5%.
- Surge in Inflation: Due to this adverse weather, food prices worldwide could increase by approximately 1.5%, which will directly impact the common man’s pocket.
Risk of crop damage in India due to impact on monsoon
Indian agriculture is largely dependent on the south-west monsoon. El Nino is often associated with weak monsoons, although this is not always necessary.
For example, despite a strong El Nino in 1997, India received 2% more rainfall than normal due to other factors such as the Indian Ocean Dipole.
