New Delhi, 11 Jan, 2017: Demonetisation was announced at the crucial stage for agricultural operations.The kharif harvest which was about to reach the markets and the rabi sowing had just begun. The genuine apprehensions about its impact on one of the largest sectors that employs about 50% of the population seem happen to be correct.
However, the kharif foodgrain production increased from 124 million tons in 2015-16 to 135 million tons in 2016-17—an impressive increase of 9% and the increased growth in production of pulses amounted to 57% rise, food prices have been showing a sharp decline. The overall food inflation, based on consumer price index (CPI), has come down from 6% in December 2015 to 2% in November this year. The corresponding decline in case of pulses is whopping—from a high of 46% to 0.2%—reflecting a much faster decline in the price of pulses.
Despite all this, NITI Aayog member Ramesh Chand told media that even post demonetisation the growth story of agriculture is intact as there is small and insignificant effect on growth of output as well as farmers’ income since November 8 when the government decided to cancel the legal tender of Rs 500 and Rs 1000 notes, thus rendering 86% of the currency redundant.
“Agriculture, which is largest informal sector of Indian economy, has shown strong resilience to effect of demonetisation,” Ramesh Chand said in media.
As per the report in ‘Economics Times’ Chand stated that no effect of demonetisation was seen on prices of major crops like paddy, soyabean, and maize in November. “instead the wholesale prices in APMC mandis of the country were around 3% higher in November as compared to the month of October.” Whereas, the facts state completely a different story. The liquidity crunch has pulled down the demand, further aggravating the plight of these farmers. There have been reports of price of vegetables dropping by almost 60% across wholesale markets. The CPI inflation of vegetables has recorded a steep decline of 10% as per the latest reports in ‘Financial Express’.
Commenting on the farmers’ income, Chand said that the growth rate in farmers’ income is projected to be slightly lower due to drop in prices of perishables during the months of November and December. “The net effect of fall in prices on farmers’ income is estimated to be -0.26%. Factoring this change, farmers’ income in year 2016-17 is projected to witness increase of 5.8% in real terms.” Paradoxically, the increase in production resulted in a worsening state of farmers’. The large increase in production resulted in a drop in prices and the public procurement of crops, like pulses, was not active enough. Even the market transactions were sluggish aftermath of demonetisation. Various reports revealed a steep decline in transactions at various states APMC’s, in some cases declining upto 70%. Farmers are being facing a lot of hardship in transporting the produce to the market, since services such as loading and unloading require labour which is cash-intensive. Decline in demand due to cash constraint has resultantly aggravated these price declines. There have been several instances of market price falling below the minimum support price (MSP) in various parts of the country.
Therefore, demonetization may not have affected agricultural growth incredibly but it has given a hardest hit to the farmers of the country, unless the public procurement of pulses improves and distress sales of perishables are addressed.