Dr. Himanshu. associate professor at JNU and a visiting fellow at Centre de Sciences Humaines, interviewed by Shreehari Paliath (IndiaSpend.com)
Bengaluru: As India deals with growing numbers of COVID-19 cases and the economic ramifications of the resultant lockdowns, the Bharatiya Janata Party-led government has made a slew of announcements and promulgated ordinances to revive the economy, including the agriculture sector. It brought in the Farmers’ Produce Trade and Commerce (Promotion & Facilitation) Ordinance 2020, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance 2020, and amended the Essential Commodities Act, all through ordinances.
India’s economy is expected to contract by 4.5% in 2020-21 while the world economy is expected to contract by 4.9%, as per International Monetary Fund estimates. While India is experiencing a slowdown and its first non-agriculture recession, the “growth of agricultural output has to be matched by rising demand”, else the “excess supply with declining demand will only drive prices down”, says Himanshu, associate professor of economics at the Centre for Economic Studies and Planning, Jawaharlal Nehru University.
Most of the announcements made by the Centre “are part of the reforms ongoing for the last two decades”, and “marketing reforms alone will not provide remunerative prices for farmers if there is declining demand and depressed commodity prices”, he tells us in this interview.
Agriculture sector will be the mainstay of India’s economy and agricultural growth is estimated to be 3%, Ramesh Chand, member of NITI Aayog, said at a press conference in April 2020. Although agricultural gross domestic product (GDP) may be positive, it may not mean an increase in farmers’ incomes. “Forget doubling incomes, farmers will be happy if they maintain positive growth in incomes,” said Himanshu.
Himanshu is a visiting fellow at Centre de Sciences Humaines, and has held visiting fellowships at London School of Economics, United Nations University-WIDER and GREQAM. He has been part of government committees including the expert group on measurement of poverty (Tendulkar Committee), National Statistical Commission and Ministry of Rural Development. In 2018, he published How Lives Change: Palanpur, India and Development Economics with Nicholas Stern and Peter Lanjouw.
He talks to us about the reforms announced by the government, the outlook for farm income growth, and decrease in rural demand as a fallout of COVID-19.
* India has produced surplus food grains over the last two decades. Yet, farm incomes seem insufficient. How are the announcements made by the Centre going to change this reality?
Farm incomes depend on revenue earned by the farmer and the costs incurred. Surplus foodgrains do not automatically mean higher profits for farmers if the revenue they earn is less than the costs incurred. This can happen if the prices of output rise slower than the prices of inputs. Except for a brief period of five months last year, for the last two years output prices have been rising slowly or have declined. As a result, even though output has increased at 2% to 3%, it has not contributed to commensurate increase in incomes.
Announcements made by the Centre are unlikely to lead to higher prices of output if the demand for agricultural commodities continues to remain low. With rising diesel prices, electricity charges and fertiliser prices, even if the farmers produce more, they can incur losses. The prices of agricultural commodities will rise if there is rise in demand for these commodities. [But] that depends on domestic as well as international demand, both of which have been declining for Indian farmers.
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IndiaSpend.com, 30 June, 2020, https://www.indiaspend.com/forget-doubling-incomes-farmers-will-be-happy-if-incomes-grow-at-all/
Tagged with: Agrarian Reforms Agricultural Income Agricultural Produce Marketing Committees Agricultural Reforms APMC Act APMC Mandis APMCs Contract Farming Dr. Himanshu Essential Commodities Act Essential Commodities Act 1955 Farmers' Income Minimum Support Price Minimum Support Prices MSP The Farmers Empowerment and Protection Agreement on Price Assurance and Farm Services Ordinance 2020 The Farmers’ Produce Trade and Commerce Promotion and Facilitation Ordinance 2020