Demonetisation: How impact on rabi cropping in Rajasthan was mitigated

The timing of demonetisation and coping strategies have mitigated any direct or substantive impact on rabi cropping in Rajasthan.

Demonetisation: How impact on rabi cropping in Rajasthan was mitigated.

NOW, THAT THE TIDES about demonetisation have subsided, we look at agrarian impact based on data in the context of 2016-17 rabi season. The results of our analysis are based on a representative survey of 1,500 farmers from Rajasthan.(The survey was carried out from December 1, 2016 to February 10 in 13 districts.) The survey records the mode of payment of farmers for the purchase of seeds, fertilisers, and pesticides as part of rabi season cropping.In understanding the possible impact of demonetisation, it is imperative to tally the timing of demonetisation (November8,2016)with the timing of input applications in the rabi season. In Rajasthan, the major rabi crops are wheat, mustard, and gram which occupy more than 80% of the total cropped area.

To compare the decisions taken in a typical season (without demonetisation), the survey asked questions on sowing dates for thesecropsfortherabiseason2015.The accompanying graph presents the percentage of farmers by sowing dates in Rajasthan. Only 2% of farmers finished their sowing bythe end of September30,34% of the total farmers finished their sowing in the month of October, 38% of the total farmers completed their sowing between November1-15,25% of the total farmers finished their sowing between November 16-30, and the remaining 1% finished their sowing in the month of December. Hence, of the percentage off armers who did sowing before and after the demonetisation 54% typically performed sowing before November 8, and the remaining 46% after.Further, from ourfield observation, it is reasonable to assume a seven-day lag in the purchase of seed,and its actual sowing in the field.

If this pattern were true, it would indicate that, 75% of the farmers would have purchased before November 8. Also,the central government took steps to mitigate the effects of cash crunch on agricultural routines such as allowing farmers to use old denomination notes of `500 for purchasing seeds and raised withdrawal limits for the farmers to alleviate cash crunch. Our survey specifically asked if the farmerhad done what was due forthe rabi season. Specifically, it asked what is/was the mode of payment for the purchase of seeds,fertilisers and pesticides. Our results suggest that all farmerswho were cultivating rabi crops in the earlier year also sowed rabi crops this year as well. (In Rajasthan, in some districts, farmers only cultivate in the Kharif season,and left their land fallow in the rabi season.) This is also confirmed by the ministry of agriculture data which suggests no decline in rabi sowing.

To further examine the issue, the survey asked farmers about the mode of payment. We find that 95% of the total farmers paid cash for buying seeds. Here, our survey has a limitation of not identifying whether farmers used old or new currency denominations to buy seeds. This suggests that whether it’s old or new currency denominations, farmers were able to purchase seeds in Rajasthan. In addition to seeds,it is also important to examine the extent to which hiring agricultural labour would have been affected. We estimate the amount of paid labour(casual labour) needed to perform basic operations, using representative data of employment and unemployment survey conducted by NSSO in 2011-12,for the estimation of paid labour (casual) requirements.

For Rajasthan; we find that out of the total agricultural labour used in sowing operations, about 91% are usually own family workers (self-employed) and 9% comprises paid labour(casual labour); similarly of the total agricultural labour used in ploughing, about 91% are family labour (self-employed) and 9% is paid labour (casual labour); similarly out of total agricultural labour use in wedding, about 89% are own family workers (self-employed) and 11% is paid labour (casual labour). (This is also reflected in overall agricultural labour use in all operations of agriculture in Rajasthan which suggests that 90% is the family labour, and only 10% is casual labour.At an all-India level,out of the total, 67% is family labour, while 33% is paid labour.) These results clearly suggests that in ploughing, sowing, and weeding, agriculture in Rajasthan is overwhelmingly dependent on family labour. Cash matters for availability of other agricultural inputs aswell.

For wheat, farmers generally require 50kg di-ammonium phosphate (DAP) per acre, at the time of sowing. The application of fertilisers and pesticides also vary by crops.To ensure the availability of cash, RBI allowed farmers to withdraw `25,000 per week (if savings accountholder), andforcurrentaccountholders (`50,000 per week). Our survey asked farmers about the mode of payment to buy fertilisers and pesticides.

Results suggest that 96% farmers purchased by cash, and the remaining purchased on credit, and by other means such as by cheques. Recall that the government also allowed old currency denomination for the purchase of petrol/diesel, and to pay electricity bills.These provisions were helpful to those who depend on machines for sowing, ploughing, and for the irrigation purposes.

Hence, the evidence suggests that the timing of demonetisation, and established and initiated coping strategies mitigated any direct or substantive impact of demonetisation on the rabi cropping in Rajasthan.

-Deepak Varsney

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