Solution to economy's woes: Boost incomes of those who will spend it best -Harish Damodaran

-Financial Express

Two measures can do much to bring back price sentiment and liquidity in agricultural markets, just when farmers are set to harvest a bumper crop.


The current economic slowdown began with Bharat. It has to also end with Bharat. According to the National Statistical Office’s GDP estimates for April-June 2019 released on Friday, India’s agriculture sector — which includes forestry and fishing — grew 2.04% year-on-year during the quarter. But what is significant isn’t the “real” growth (i.e. at constant prices) in gross value added or GVA. More relevant is GVA – the value of output of a good, less the cost of all inputs and raw material used in its production — rising by 7.90% in “nominal” terms or at current prices. It means farm prices going up by 5.74% in April-June 2019 over April-June 2018.

This is, in fact, the highest increase in agricultural produce prices since July-September 2016, the quarter that preceded the demonetisation announcement of November 8, 2016. Since that overnight scrapping of all outstanding high-value currency notes by the Narendra Modi government, there have been some quarters where farm GVA growth has actually been lower in nominal than in real terms. Those quarters (April-June 2017, July-September 2018 and October-December 2018) had, in other words, registered negative inflation or deflation.

The last quarter’s data suggests that farm prices are showing signs of recovery. Many commodities — from maize, bajra (pearl-millet), jowar (sorghum) and cotton, to onion and milk — are fetching good or better rates today compared to a year ago. If sustained in the coming quarters, it can help reignite growth in the broader economy through a revival in rural consumption that comes with higher incomes. The all-round slowdown we are seeing, after all, started with agriculture.

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Financial Express, 5 September, 2019, https://www.financialexpress.com/economy/solution-to-economys-woes-boost-incomes-of-those-who-will-spend-it-best/1696778/lite/

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