New Delhi: Farmers across the country are bearing the brunt of the low food prices that have resulted in low inflation.
India’s headline inflation for August was a comforting 3.7%, which is lower than the 4.2% of July, according to data released by the Central Statistics Office on Wednesday. This has been largely driven by the sharp fall in prices of several food commodities such as pulses, sugar and vegetables, as food products have a 54% weight in the retail inflation index.
A 7.8% fall in the price of vegetables, 7% decline in the price of pulses, and 5.5% decline in sugar prices have led to retail food prices changing little year-on-year and the consumer food price inflation (CFPI) being a mere 0.3% in August.
These numbers have brought cheer to the consumers but do not bode well for the farmers who are battling consecutive years of falling prices on the back of record harvests. The distress in rural India is also worsened by the negative growth in real rural wages from November 2017 till March this year.
This is not good news for the Bharatiya Janata Party (BJP), which is in power in centre, as the Lok Sabha elections are less than a year away and assembly polls are also to be held this year in Madhya Pradesh, Chhattisgarh and Rajasthan, where farm distress will be a major issue for opposition parties.
The government is taking steps to mitigate the adverse effect on farmers. In early July, the government announced new minimum support prices (MSPs) for kharif crops, saying that the aim was to ensure that farmers get 50% returns over costs. On Wednesday it launched an umbrella price support scheme named Pradhan Mantri Annadata Aay Sanrakshan Abhiyan, to ensure farmers growing pulses and oilseeds receive remunerative prices. This comes against the backdrop of the steps taken last year not providing respite to the farmers. Central agencies had last year procured ₹ 30,000 crore worth of pulses and oilseeds at MSP from farmers as their prices plunged below MSP.
“The fall in food prices is because of a situation of excess supply with little room for export of commodities like pulses and sugar," said Ashok Gulati, agriculture chair professor at the Delhi-based Indian Council for Research in International Economic Relations.
“Whether the new procurement schemes that have been announced by the centre will lead to higher prices for farmers will be clear post November (following the harvest of kharif crops) but it will depend on the effectiveness of the government’s market interventions," Gulati said.