Agri price volatility
Policy should focus on reducing volatility by allowing futures trading and encouraging investment in cold-storage facilities, along with a national market for agriculture
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India’s farm economy is undergoing a structural shift—for the sixth straight year, horticulture crop output has exceeded foodgrain production. But price volatility is a major problem. Therefore, last week, the Bharatiya Janata Party (BJP) government in Haryana launched the Bhavantar Bharpai Yojna for vegetables. Under the scheme, the government will announce prices for four vegetables before the sowing season and compensate farmers if there is a price deficit in the market.
A similar scheme was launched by Madhya Pradesh’s BJP government in 2017, but that has been undermined by traders who depressed prices in mandis, since farmers were going to be compensated by the government anyway. The MP experience is instructive. Government policy should focus on reducing volatility in prices by allowing futures trading and encouraging investment in cold-storage facilities, along with creating a national market for agriculture. Artificial incentives that are unsustainable and fiscally irresponsible must end.
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