Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op ed of the day] Stay with stimulus

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- Provisions in the budget to revive the economy-need for the fiscal stimulus, policies of the Government with respect to agriculture.

Context

The stimulus needs to continue and the reforms will help to keep the economy going. If gross savings and investment rates keep on falling it is difficult to revive the economy.

What was expected in the last budget?

  • Increase in pubic investment: The first thing, it said, was to increase public investment and not play statistical or token announcement games.
  • The upswing in manufacturing growth, from negative to slightly less than 3 per cent (not industrial growth, because that includes mining and electricity), needed consolidation.
  • Real outlays in infra did not go up: Real outlays on the infrastructure needed to go up, but they did not.
    • So the push to private demand and a virtuous cycle of growth was missed.
    • The implicit numbers in the Budget math comprise growth of around 7 per cent, assuming a 5 per cent inflation rate.

Prospects of the Agri-sector

  • A good sign in Agri in midterm: For agriculture, in the medium-term, we are alright. Kharif grain production was 6.4 per cent higher than the previous five-year average output.
    • Kharif oilseeds output around eleven lakh tonnes above the earlier year.
    • This was, however, based on a delayed monsoon which caused problems and anxieties in the second quarter of this year.
  • Nightmare of government unloading grain in the market: Foodgrains are doing well and we have huge food stocks.
    • But, instead of a blessing, the government turned public operations in grain into a nightmare by announcing that FCI will unload grain at a reserve price less than MSP.
    • Rabi acreage recovered and is now 8 per cent more than last year, but the policy of government operations to reduce the market price of grain by its intervention is a nightmare.
  • This is bound to affect input growth in the expanded acreage in the winter crops.

Wrong policy in Agriculture

  • Terms of trade against agriculture: The terms of trade are going against agriculture, according to CACP (Commission for Agricultural Costs & Prices) estimates, and selling of the grain will make it worse.
  • While the fundamentals are alright, to wallop the farmer with a “cut in the reserve price” would harm the farmers.
  • The rabi report of CACP will say that the terms of trade have gone down more.

Conclusion

The Government should continue with the stimulus and opt for the reforms in the economy only to keep the economy going. If the gross savings and investment rates keep falling it would be difficult to revive the economy. If savings keep up, the government will have actual space to divert some real resources to infrastructure investment.

 

 

 

 

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments