Retail Inflation Down At The Cost Of Farmers

Should India cheer the decline in inflation rate or mourn it as this was caused largely by a fall in the prices of agricultural produce and thus, would affect the country’s farm economy?

- Tushar K. Mahanti

The softening of inflation rate would help to protect the purchasing power of an average Indian, but the fall in prices of agricultural goods would trim down the earnings of farmers, who are already in distress. In fact, Indian farmers have long been blaming the low prices of agricultural goods as the main cause of their suffering.

The government has raised the MSP by 1.5 times of input cost. But this has hardly helped the farmers’ cause. As per the Shanta Kumar Committee, only 6% farmers get the benefit of MSP. If this is true, the raising of the MSP by 1.5 times of input costs has no meaning for the remaining 94% of the farmers.

Indian farmers in desperation have been trying to promote their cause at different forums. There was the long march of Nasik’s farmers to Mumbai in 2018. They have begun it again as the promises made then are unfulfilled.

The government will probably come out with another fresh formula to appease the farmers’ grievances; it may come out with another round of loan waiver scheme or may increase the amount of money it has promised to give to every small farmer with land up to two hectares. But the root cause, unremunerative prices of products, will wait for fresh initiative. If so, Prime Minister Narendra Modi’s call for doubling farmers’ income in six years will remain an illusion.

India’s retail inflation eased to a 19-month low in January 2019 justifying the central bank’s decision earlier to lower policy rates to promote industrial investment. Consumer prices rose 2.05% in January from a year earlier. This compares well within the Reserve Bank of India’s 2.8% projection for January to March, 2019.