Not demonetization, here’s what caused the farmers crisis in Maharashtra, Madhya Pradesh–Financial Express–17-06-2017

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  1. Talk to anyone in the agriculture/commodities sector, and they will tell you about the typical agriculture price-output cycle. A huge price spike will cause a surge in production which, in the absence of adequate storage or bulk buyers, leads to a sudden collapse in prices; this leads to a fall in sowing the next year and a spike in prices.
  2. That prices should collapse is, of course, no surprise since in the absence of a big buyer, this is a simple matter of supply exceeding demand.
  3. Had FDI in retail been allowed and big retail chains entered the market, things could have been different. Or, if food processing had grown large enough, the large production would simply have been processed.
  4. With neither large retailers nor large processors, there is not enough cold storage either—according to food processing minister Harsimrat Kaur Badal, the storage capacity for horticulture is just around 6% of the country’s total need.
  5. Given the BJP’s 2014 promise of raising farmer profit margins to 50%—this later morphed into doubling incomes by 2022— it is amazing that the government never woke up to this reality sooner. With even retail food inflation falling from 6.3% in April 2016 to just 1.2% in April 2017, it is obvious farmer margins have been even further squeezed.
  6. Apart from the government dilly dallying on FDI in retail, reforms like futures and creating a pan-Indian agriculture market which will take time, it continues to impose stocking limits and bans exports the moment farm prices start to rise. Its latest response, earlier this week, was to increase interest subvention on farm loans by another Rs 5,339 crore, taking the total to `20,339 crore this year.
  7. What it doesn’t take into account is that, while 45% of all farm credit is still from the informal sector, the bulk of loans are in any case taken by better-off farmers. And, as a study by ICRIER points out, there are large leakages in such loans.

via Not demonetisation, here’s what caused the farmers crisis in Maharashtra, Madhya Pradesh – The Financial Express

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