‘Problem of plenty’ triggers slowdown

payment mechanism. These are still works in progress. This year has been different from typical years for Indian agriculture. The country has seen a reduction in acreage and sowing in both kharif (summer-sown) and rabi (winter-sown) crops. “In fact, it’s not your typical surplus leading to large declines in prices,” chief economic adviser Arvind Subramanian had said at the launch of this year’s Economic Survey. Yet, in crops like gram (channa) and soyabean, increases in production led to a large price reduction. Lower sowing led to lower demand for farm labour, causing rural wages to decelerate.

Mirroring the fall in agricultural prices, retail inflation declined sharply between 2015-16 and 2018-17, averaging 4.7%, falling by more than half from 10.2% in the preceding five years. Falling food inflation, which has had a big role in this, has also been the result of a combination of factors. Good monsoons and surplus output apart, lower increases in minimum support prices and sluggish global commodity prices have also contributed to farm distress.

The shocks of demonetisation and the Good and Services Tax are dissipating, but they impacted the agriculture sector. Farm exports fell by 3.1% average between 2015-16 and 2018-19, compared with 19.5% growth between fiscals 2010-11 and 2014-15. “In 2015 and 2016, agricultural output fell due to poor rains and when production picked up in the next two fiscals, collapse in agricultural prices hit farm incomes,” said economist Madan Sabnavis. The 2018-19 kharif season beginning June will be critical, as farmers await announcement of government’s proposals to ensure remunerative prices.