Falling agricultural earnings
On Tuesday, Rahul Gandhi quite much set the Congress scheduled for the 2019 polls when he stated that “the primary combat in India is between farmers and the segregated sections on the one hand, and rich industrialists on the opposite.” This time around, although angst at the farm gate isn’t due to negative harvest, however, vulnerable realization.
While actual agricultural GDP increase has remained wholesome, nominal GDP has decelerated sharply. In FY2017 and FY2018, nominal agricultural GDP increase fell to an average of 8% from a 16% average at some point of FY2011-FY2014, at the same time as real GDP growth remained above fashion at about four.Eight%. When comparing those two ‘regular monsoon’ periods within the current beyond, we discover that actual agricultural GDP becomes four in the first half of this fiscal year.6%, whilst nominal GDP changed into just 4.Nine%. In the second sector, nominal growth fell beneath real at 2.8% and three—8%, respectively.
These numbers underscore the drop in farm earnings, notwithstanding three straight years of ordinary monsoon. On the other hand, the agricultural boom is possibly too common at about four% at some stage in FY2017-FY2019, compared to the lengthy-time period fashion rate of about three—5%, suggesting that farm output is on a canter.
Agricultural changes aren’t only trailing the recently revised minimum aid costs (MSPs). However, they’re also beneath the fee of production in a few cases. Clearly, susceptible pricing strength is squeezing farm earnings, even because it has helped to hold food inflation down.
In the past — in particular throughout 2011-14 —high global food charges, sharper hikes in MSPs, demand-focused stimuli to usual intake via decreased hobby charges, tax cuts, and salary employment programmes in rural India had a telling effect on charge increases, together with food, which then translated into higher farmer earning. Many of these elements are actually absent. Also, the release of excess food stocks has stored a lid at the expense of some cereals and pulses.
Data up to November show mandi fees for most crops are bottoming out. But to this point, fees of 9 of the 10 important Kharif plants are under their MSPs. Of those, the simplest 4 have been able to cowl their costs. For many others, they’re nonetheless under the revised MSPs that had promised 50% returns over fees.
Reportedly, procurement has now not amassed momentum, given the shortage of warehousing space, terrible first-rate produce from weather-hit regions, and an endured cognizance on the procurement of crops consisting of paddy that advantage best a handful of states like Punjab and Haryana. So far, rice by myself has been worthwhile; its price is better than value as well as MSP (revised up thirteen% in July). Rains this 12 months had been abundant, ensuing in reasonable sowing.
For pulse growers, although, the image is less optimistic. The crop suffers from a cobweb phenomenon’, where farmers base their sowing choices on expenses witnessed in the previous advertising period. Falling fees ultimate yr brought about lower sowing. This season, expenses have no longer most effective stayed underneath the revised MSP —four% better for urad and tur, 25% better for moong — but have also been beneath the production fee.
The tale is similar for jowar. The situation is marginally better for soybean, groundnut, and gram, in which prices cover the farmers’ expenses however are nonetheless underneath MSPs. Moreover, farmers have been reportedly protecting back shares, awaiting expenses to rise or the government to increase help. Chances of a downward strain on expenses whilst those shares input the markets exist, except the government intervenes. In contrast, coins crops are seeing better days, with fees sequentially growing for sugarcane, jute, and oilseeds.
But, once more, not all is well for vegetable farmers, for whom volatility in prices and uncertainty approximately expected realizations are of the subject. Price volatility, measured through well-known deviation, has been as high as eight.7 in veggies in the past years, compared to at least one.4 in foodgrains and a couple of—three in oilseeds.
This isn’t to signify we need to return to high meals inflation. There needs to be a way to trim middlemen margins. Making the farmer realise a bigger part of the fee chain, as in the dairy area, will enhance farm incomes while keeping food inflation low.
In the closing Union Budget, GoI had introduced a key measure to enable better fee discovery for farmers with the aid of the Gramin Agricultural Markets (GrAMs) and their linkage to the web buying and selling platform for agriculture commodities (e-NAM).
But there has been restrained development.
Uncertainty on rate movements is a major deterrent to sowing decisions. This leads to farmer distress whilst prices fall under production cost. So, till the proper policy signals are sighted, farmers will continue to get battered regardless of ordinary rain.