Worst price slump in 18 years shows scale of farm crisis

WPI FINDING Worry for govt as incomes stagnate, input costs swell

NEW DELHI: This financial year, 2018-19 could end up being the worst year for farm incomes in almost two decades, government data indicates in a revelation that emphasises the gravity of the ongoing agrarian crisis and highlights a possible fault line for the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government ahead of the Lok Sabha elections.

According to Wholesale Price Index (WPI) data for the month of December released on Monday by the ministry of commerce and industry, the WPI sub-component for primary food articles has been negative for six consecutive months beginning July 2018. This means their prices are falling.

WPI for primary food articles is a good indicator of farm-gate prices as farmers sell their products in wholesale rather than retail markets. Even the food sub-component of the Consumer Price Index (CPI) basket has registered negative growth between October and December 2018. The disinflation in wholesale prices is not visible in the non-farm economy though. The overall WPI has shown positive growth in all these months.

Analysts say the asymmetry in inflation – falling farm-gate prices and rising non-farm prices – means that farmers have suffered deterioration in their terms of trade. They are selling their products cheaper, but having to buy other things at higher prices.

The WPI sub-component for food components was -0.1% in December. It was -2.1%, -4%, -0.2%, -1.4% and -3.3% in the preceding five months.

The last time WPI for primary food articles showed negative annual growth for two consecutive quarters was in 1990.

The disinflation in farm prices has also led to a collapse in nominal farm incomes, which was last seen in 2000-01.

Doubling farm incomes was one of biggest promises of the Narendra Modi government after it assumed office in 2014. It was repeated during a resolution on agriculture adopted by the BJP at its recent national council meeting in New Delhi.

The resolution says: “Budget allocation for the agriculture sector has also increased in recent years and this government is fast reaching towards the goal of ‘doubling the farm income’. This National Council expresses its confidence that the aim of ‘doubling the farm-income’ would be achieved in given time period under the BJP government.”

ANALYSTS SAY THE ASYMMETRY IN INFLATION MEANS THAT FARMERS HAVE SUFFERED DETERIORATION IN THEIR TERMS OF TRADE