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Wednesday, July 06, 2022

Rural imperative

As Covid makes deeper inroads into rural areas, government response should focus on cash transfers

By: Editorial |
Updated: May 13, 2021 8:30:00 am
Indian economy, minimum support price, Rural imperative, india second wave, second wave of covid-19, indian expressThe end result was that rural India provided a cushion for the economy, which suffered its worst recession since Independence and the first after 1979-80.

The year 2020-21 was exceptional, where the farm sector expanded by 3 per cent, even as the Indian economy as a whole contracted by 6.5 per cent. Agricultural exports also grew 17.5 per cent, despite the value of the country’s overall merchandise shipments falling by 7.2 per cent. There were three drivers behind this unusual dichotomy. The first, of course, was Covid-19 cases being very low in rural areas last year and the government exempting agricultural activities from lockdown restrictions. The second was excellent rains and favourable winter temperatures that helped farmers harvest a bumper crop. The third was a spike in global agri-commodity prices from around October, the benefits of which were reaped by soyabean, mustard, groundnut, cotton, arhar, urad and chana growers. All these crops were sold near or above their minimum support price (MSP) levels, making it a Goldilocks moment of sorts for farmers, who produced more as well as realised good harvest prices. The end result was that rural India provided a cushion for the economy, which suffered its worst recession since Independence and the first after 1979-80.

The availability of that cushion is in doubt today, with the second wave of the pandemic not sparing even the hinterlands. The Indian Meteorological Department has forecast a normal southwest monsoon, while the Food and Agricultural Organisation’s world food price index hit an 83-month-high in April. On both these fronts — rainfall and prices — the outlook for agriculture, thus, remains favourable. That leaves the one, albeit major, source of uncertainty: The spread, intensity and duration of the pandemic. The sole consolation as of now is that the main kharif planting season will begin only from mid-June with the arrival of the monsoon rains. If the current wave subsides by then, things shouldn’t turn out too bad. That, needless to add, is a best case scenario — including for tractor, FMCG and cement companies that rode high on rural demand in 2020-21.

Last year, the government did two things that were right. The first one was to undertake massive procurement of wheat, paddy, mustard and rabi pulses that were marketed post the lockdown. The second was the record 389.37 crore person-days of employment that got generated under MGNREGA during 2020-21. Both these, together with the Rs 6,000-per-farmer cash transfer under PM-Kisan, ensured sizeable liquidity infusion into the rural economy. This year, there is not much requirement for MSP procurement, barring in wheat. The scope of MGNREGA works is also limited when Covid has made deep inroads into rural areas. The focus should, instead, be more on cash transfers. There’s no better time to put to use the JAM (Jan Dhan-Aadhaar-Mobile) infrastructure than now.

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