1. Urbanites cheer, farmers shed tears as falling food prices pull inflation lower

Urbanites cheer, farmers shed tears as falling food prices pull inflation lower

Falling food inflation poses serious policy challenge to the government, which may find itself torn between balancing a large consuming population’s need for modest food prices and the farmers need for a sustainable rise in incomes.

By: | Published: June 13, 2017 2:54 PM
Food inflation has subdued with the government’s active role in controlling the rise in prices and RBI’s inflation-targeting mandate. Retail food prices in May actually fell 1.05% from a year ago. (Image: Reuters)

Most urban-dwelling Indians might have cheered the inflation data released yesterday, which showed that the consumer price index inflation fell to a five-and-a-half-year low of a mere 2.18% for the month of May as compared to the same month a year ago. What must have brought more joy to most households is the fact that food inflation was in negative, which means that prices of food actually fell.

However, standing opposite this widespread smile of relief is the face of sobbing Indian farmers, agitating, protesting, and more recently, getting killed while taking bullets.

Over the last one year, the food inflation has subdued substantially, with the government’s active role in controlling the rise in prices and RBI’s inflation-targeting mandate. The latest inflation data released yesterday showed that retail food prices in May fell 1.05% from a year ago. This compares with a modest 0.61% inflation on-year in April. This is in sharp contrast to the last year, when food inflation was as high as 8.35% in July, from where it subdued to 3.32% in October, and as low as 0.53% in January.

Farm income falls

Low retail food prices have been known directly hurt farmer incomes. In the recent years, farmers, who have been in serious troubles due to modest rise or even a fall in food prices, have been forced to sell their produce in the open markets below the minimum support price (MSP). Not only this, they have been selling a lot of produce ranging from potato, tomato, onion and pulses below their costs, and have been unable to recover the expenses incurred in cultivation.

A sharp decline in commodity prices and the unprecedented move of demonetisation of high-value currency notes have further aggravated the farmers’ woes over the last one year. Various reports from the ground show that market prices of vegetables such as potato, tomato and garlic have fallen to less than half since July. Onion prices are down by over 20% in the same period.

MSP fails to support

The MSP itself, which is supposed to be a support system to sustain farmers’ income against the shocks of falling commodity prices, has not been able to fulfil much of its purpose. MSP has risen by an average of merely 3.5% per year in the last three years’ of the present NDA government’s rule, whereas overall average inflation during the same period has been at about 7%.

This is not in line with the recommendations of National Commission of Farmers headed by M S Swaminathan, which had suggested fixing MSPs at 50% above the cost of cultivation. Also, the fall in real income of the farmers, as has been pointed out by numerous surveys, is a far cry from Prime Minister Narendra Modi’s promise to double farm incomes by the year 2022.

The situation poses a serious policy challenge to the government, which is now finding itself torn between balancing a large consuming population’s need for modest food prices and the farmers need for a sustainable rise in incomes.

  1. N
    Narendra M Apte
    Jun 13, 2017 at 6:08 pm
    1. Consumers in urban areas wish that farmers are happy. Difference between price for farm produce paid by urban consumers and one realised by farmers is huge. On the one hand farmers are deprived of a fair market price for farm produce they sell and on the other hand urban consumers pay a high price. 2. I believe that prices for agricultural produce paid to farmers are influenced by actions of members of Agricultural Produce Marketing Committees (APMCs’) who are middlemen. 3. APMC market is the marketplace for farmers. Since APMCs members control the of farm produce, both farmers and consumers are helpless. 3. Today APMCs are not professionally managed their business methods lack transparency. 4. Therefore, APMCs have to be replaced by a more robust, farmer-friendly marketing set-up. 4. If freedom is given to farmers to sell their produce anywhere and to anyone, and not compulsorily in the APMC markets, farmers’ income will increase and urban consumers will be happy too.
    Reply
    1. Suresh Rao
      Jun 13, 2017 at 4:29 pm
      Indian farmers should get machinery to cut plus vacuum pack produce in tin cans into their farms. They can then store their surplus produce for export. Mideastern countries would welcome such produce that has longer storage life. Middlemen can be eliminated by advertising vacuum packed cut veggies, corn on their own s. By doing this they well sell such produce at a better price, store surplus for longer periods an eliminate middlemen. Even surplus milk can be converted into cottage cheese (paneer) for export soya and pressed coconut oils can also be exported easily. Banks should give loan for importing such machinery (if necessary technology is there in India though.) All they need is power to interior farms lands.
      Reply
      1. K
        Krishnan
        Jun 13, 2017 at 3:42 pm
        Farmers should get reasonably good price for their efforts and it should be profitable trade. Similarly the customers should get the food items at the reasonably affordable price. To achieve this, we need to reduce the middle man (thus inefficiency) and the loss due to transportation and post harvest losses. If there is efficient supply chain from farm to customer with out inefficiency both can benefit. Here the technology can help.
        Reply
        1. J
          Javid
          Jun 13, 2017 at 3:39 pm
          Its only numbers where is the reduction in prices - have prices of any commodities come down?
          Reply

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