Combination dose

A correction in farm prices, along with a bumper crop, is just what the rural economy needs today.

By: Editorial | Published: August 16, 2016 12:01 am

A bumper harvest for farmers is welcome news, especially coming after two years of drought and successive crop failures. No less important, though, is that it is being accompanied by a recovery of sorts in prices of many agri-commodities, from sugar and milk to cotton and rubber. Besides, farmers have this time significantly ramped up acreages under pulses, where prices were already ruling sky-high and are unlikely to fall beyond a point even with record production, given the country’s overall supply deficit position. In the last two years, Indian agriculture experienced a “perfect storm” from both extreme weather events as well as a global commodity crash. Together, they took a heavy toll on farm incomes that registered an average annual growth of barely 3.5 per cent in 2014-15 and 2015-16, as against an estimated 13.9 per cent in the preceding 10-year period.

That should hopefully change for the better this year, with an excellent monsoon so far and improved global price prospects for most farm commodities. The Food and Agricultural Organisation’s Food Price Index has risen by 8.4 per cent this year. While it is difficult to see prices going back to their pre-crash peaks, there is equal reason to believe that the worst of the bear phase is over. That matters a great deal for Indian farmers, much more exposed to the vicissitudes of global commodity markets today. When global prices were good, the country’s agri-exports soared from $ 7.5 billion in 2003-04 to over $ 43 billion in 2013-14. But when they crashed, exports, too, plunged to $ 32.5 billion in 2015-16. The same farmers — whether growers of cotton in Gujarat, basmati paddy in Haryana, guar in Rajasthan, rubber in Kerala or maize in Bihar — who benefited during the boom suffered a sharp reversal of fortunes in the crash that followed.

Now that prices are showing signs of correction, the least the Centre can do is to allow it to happen. In recent times, there has been a tendency to clamp restrictions — whether on stockholding, exports or futures trading — at the slightest hint of increase in prices of farm produce. The temptation to resort to such measures can be more with the fixing of a 4 per cent annual consumer price inflation target, based on an index where food and beverage items have a 45.86 per cent weight. But that would ultimately not be good either for rural incomes or the broader economy.

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