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LATEST NEWS UPDATES | Instead of farm loan waivers, invest more in agricultural infrastructure -Himanshu

Instead of farm loan waivers, invest more in agricultural infrastructure -Himanshu

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published Published on Jun 16, 2017   modified Modified on Jun 16, 2017
-Livemint.com

Not only better integration of farmers with markets, but also large investments in agriculture are the need of the hour

The deaths of five farmers in Madhya Pradesh’s Mandsaur district has brought the crisis in agriculture centre stage. While the latest incident may have got media coverage, the fact is that the crisis has been in the making for some time. It intensified in the last one year but signs of farmer unease and severe distress were visible as early as late 2014. In the last year alone, large-scale farmer mobilization and agitations have been seen in Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh and Karnataka.

How did things come to such a pass? Simply put, a colossal failure to read the tea leaves. The national accounts (new series) data clearly demonstrates that agriculture is facing a severe slowdown. The net value added (NVA) in agriculture declined at 0.23% per annum in the first two years of the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government. Even accounting for bumper production last year, gross value added (GVA) in agriculture has grown at 1.77% in the last three years.

More worryingly, the data shows investment in agriculture is declining at 0.8% per year at constant prices since 2010-11. For the first two years of this government, investment in agriculture declined at 3.8% per annum. It declined from Rs2.84 trillion in 2013-14 to Rs2.63 trillion in 2015-16 at 2011-12 prices—the sharpest fall in more than two decades.

The distress in rural economy began in 2013 with growth rate of rural wages declining in real terms. This was the first signal which went unnoticed. This was further compounded by the back-to-back droughts in 2014 and 2015, only the third such instance since independence. Last year was a good year as far as rainfall was concerned but it was uneven in its distribution with parts of south India receiving scant to deficient rain.

At the same time, the terms of trade have moved against agriculture in the last three years. The collapse of agricultural commodity prices after August 2014 only aggravated the distress in the rural economy, which was already experiencing shrinking incomes. While this was largely led by a drop in prices of most cash crops, including horticultural products, even for foodgrains the price inflation was minimal.

Not only was the growth of minimum support price (MSP) minimal, the central government refused to pay the usual bonus that the farmers were given. For crops such as pulses, the MSP announced was much lower than promised; even at the lower MSP, the procurement was severely short of the target.

No wonder then that retail inflation slowed to 2% overall and food inflation came in at a negative 1.05% last month. Negative food inflation along with declining wages in rural areas confirms severe demand deflation. It has contributed largely to the collapse of agricultural prices. The final nail in the coffin was the demonetization of high-value currency notes, which affected the purchasing capacity of market traders, forcing farmers to undertake distress sales.

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Livemint.com, 16 June, 2017, http://www.livemint.com/Opinion/DXS8vPiRhgP7Lmfmpwal2O/Instead-of-farm-loan-waivers-invest-more-in-agricultural-in.html


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