Deflation in WPI of 8 kharif crops observed during 2016-17 to 2018-19, while their MSPs grew at a positive rate

Deflation in WPI of 8 kharif crops observed during 2016-17 to 2018-19, while their MSPs grew at a positive rate

It is being said by economists that unlike the issue of low food production that gripped Indian agriculture for long in the past, the present problem is about farmers not getting remunerative prices against the crops that they are growing. According to farmer leaders, the policymakers are too late to realise that bitter truth. As a result, there is a growing disenchantment in the rural hinterland against the ruling government at the Centre.

An analysis of 14 kharif crops, namely paddy, jowar (sorghum), bajra (pearl millet), ragi (finger millet), maize, arhar/ tur (pigeon pea), moong, urad (black gram), cotton, groundnut, soyabean, sunflower seed, sesamum and Niger seed by the Inclusive Media for Change team has found that the average annual growth rate of minimum support prices - MSP (kharif) surpassed the average annual growth rate of Wholesale Price Index (WPI) during the period 2016-17 to 2018-19.

Chart-1 shows that for all the 14 kharif crops the above-mentioned statement holds true. For example, in the case of ragi, the average annual growth rate in MSP (kharif) between 2016-17 and 2018-19 was 22.39 percent. However, the average annual rate of inflation in WPI of ragi was 10.57 percent during the 3-years span.
 
Chart 1 Average annual growth rate in WPI & MSP of selected kharif crops between 2016-17 and 2018-19
 
Note: The above-mentioned calculated figures related to 'average annual growth rate in MSP' in the chart-1 are based on the MSPs of Paddy Common, Jowar (Maldandi), Bajra, Ragi, Maize, Arhar (Tur), Moong, Urad, Cotton (long staple), Groundnut (in shell), Soyabean Yellow, Sunflower Seed, Sesamum and Niger seed. It may be noted that officially the MSP figures are given according to crop year (Fair Average Quality), in Rs. per quintal.

Similarly, the above-mentioned calculated figures related to 'average annual rate of inflation in WPI' in the chart-1 are based on the WPI (Base 2011-12=100) of Paddy, Jowar, Bajra, Ragi, Maize, Arhar, Moong, Urad, Raw Cotton, Groundnut Seed, Soyabean, Sunflower, Sesamum (Gingelly Seed) and Niger seed. The WPI figures in our analysis are according to financial year (FY). The WPI figures related to FY 2018-19 is the average WPI during April, 2018 to November, 2018.
 
Source: Wholesale Price Index (WPI) Data (2011-12=100), Office of the Economic Adviser, Ministry of Commerce & Industry, please click here to access 

MSP for kharif crops 2018-19, please click here to access
 

MSP (in Rs. per quintal) according to crop years (2013-14 to 2017-18) as on 7th June, 2017, NABARD, please click here to access
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It could be observed from chart-1 that the average annual growth rate in WPI of maize (-0.23 percent), arhar (-15.12 percent), moong (-10.61 percent), urad (-12.92 percent), groundnut (-3.09 percent), soyabean (-0.03 percent), sunflower seed (-1.63 percent) and Niger seed (-12.81 percent) was negative between 2016-17 and 2018-19.

Since official procurement is a small fraction of the production of each of the 13 kharif crops (paddy excluded), the raising of MSP in the last 3 financial years had little impact on the inflation rate (WPI-based) of these crops.

The analysis by the Inclusive Media for Change team is based on the assumption that most farmers bring their kharif crops to mandis viz. market centres for bulk sale. Since there is no official information about the farm gate price, or the price that peasants actually get for their crops, we have relied on WPI (Base 2011-12=100) in our analysis. In reality, it may be the case that farmers receive a fraction of the wholesale prices, as has been pointed out by various economists.

Inflation in retail prices

Apart from being producers of crops, farmers are consumers too. Table-1 indicates that the rate of inflation in Consumer Price Index of the 'miscellaneous' group exceeded the rate of inflation in Consumer Food Price Index (CFPI) as well as Consumer Price Index general (all groups) in the rural areas.

Table 1: Rate of inflation in retail prices (Base 2012=100) in rural areas

 
Table 1 CPI inflation rate
 
Note: The CPI figures in our analysis are according to FY. The CPI figures related to FY 2018-19 is the average CPI during April, 2018 to November, 2018.

Source: Consumer Price Indices Warehouse, Ministry of Statistics and Programme Implementation (MoSPI), please click here to access


It may be noted that the ‘miscellaneous’ group comprises Household goods and services; Health; Transport and communication; Recreation and amusement; Education; and Personal care and effects.

Against the backdrop of privatisation of most services, rural areas have witnessed a higher rate of inflation in services that are included in the ‘miscellaneous’ group such as health and education vis-à-vis the rate of inflation in CFPI and CPI. Thus, ensuring remunerative prices for crops, which farmers and peasants grow, among other things, is essential to cover the rising cost of such privatised services.    

References

Wholesale Price Index (WPI) Data (2011-12=100), Office of the Economic Adviser, Ministry of Commerce & Industry, please click here to access 

Consumer Price Indices Warehouse, Ministry of Statistics and Programme Implementation, please click here to access
 
MSP for kharif crops 2018-19, please click here to access

MSP (in Rs. per quintal) according to crop years (2013-14 to 2017-18) as on 7th June, 2017, NABARD, please click here to access

CACP Report on Price Policy for Kharif crops of 2018-19 season, please click here to access
 
Hidden figures: The numbers show absolute deterioration in the condition of farmers -Prabhat Patnaik, The Telegraph, 12 December, 2018, please click here to access 
 

Image Courtesy: Himanshu Joshi



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