Going beyond tomato a fruit or vegetable debate: economic and policy challenges in tomato farming in India

Learning outcomes The case was an application of a market demand and supply mechanism and its impact on the product’s price and focus on the following objectives:▪ Analyze the vegetable market in India and the challenges faced by the farmers (tomatoes) using demand and supply concepts.▪ Examine the impact of price elasticity on the revenue of the farmers.▪ Assess the challenges faced by the government in controlling prices of vegetables and food inflation.▪ Evaluate diversification strategies in agriculture to mitigate risk. Case overview/synopsis The market for tomatoes was highly cyclical because of erratic rainfall, and farmers went through a difficult time, especially when the prices fell below the cost of production. They moved out for crops that had stable prices. They expected government support for price stability. Government and policymakers considered price fluctuations a short-term phenomenon that required limited interventions when prices were high. This case was about Dilip, a farmer who was into farming tomatoes on a large scale in Karnataka, India. He was facing a dilemma as to whether he had to continue or move to other crops because of the low price of tomatoes in May 2023 or to diversify into some small but related business. He was worried at the same time, curious to understand the volatility in the prices of tomatoes, government responses, risks and returns associated with the cultivation of this crop and Agri-supply chain. Based on his understanding, he should make decisions to continue or diversify into some other farming or related business. Complexity academic level This case was written for microeconomics and managerial economics of undergraduate and postgraduate students. This case demonstrates the application of the demand and supply mechanism for a perishable product such as tomatoes. Price fluctuations are common in these markets because of various uncontrollable factors such as rain, pests and natural calamities. The case could show the relationship between the firm’s elasticities and revenue. This case also highlights the policy constraints in controlling the prices in the short run. This case could also be used for understanding macroeconomic concepts such as food inflation and its impact on general price inflation. The students or target audience with a background in the functioning of the markets could very well relate to the concepts discussed. Supplementary material Teaching notes are available for educators only. Subject Code CSS: Entrepreneurship (3); Management Science (7).