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Where is Agriculture headed?: A Pessimistic View Himanshu JNU.

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Presentation on theme: "Where is Agriculture headed?: A Pessimistic View Himanshu JNU."— Presentation transcript:

1 Where is Agriculture headed?: A Pessimistic View Himanshu JNU

2 2 GDP has grown at more than 5% since the mid-1980s. The acceleration in growth rates to more than 9% since 2005-06 was short lived with growth rates slowing down in the last 2 years.

3 This was also accompanied by revival of agricultural growth rates in the later part of last decade. However, 60% of cultivated area is rain- fed and there are disparities across region and crop. 3

4 Agrarian Revival since 2005 Revival since 2004-05 after the worst crisis during 1997-2004 Agricultural growth rate picked up: more than 3.5% after 2004-5 Agricultural investment picked up Agricultural credit quadrupled Good monsoon TOT moving in favour of agriculture

5 Public Investment in Agriculture picked up after 2003-04 (1999-00 constant prices)

6 Private investment in agriculture grew faster with share of public investment remaining unchanged.

7 Agricultural credit which was almost stagnant until 2003, picked up dramatically and quadrupled by 2012

8 Not all the credit benefitted the farmers, particularly the small and marginal farmers.

9 The increase in MSP also benefitted the farmers. The margin of MSP over cost continued to increase Year C 2 Cost MSP Fixed % Margin over C 2 PaddyWheatPaddyWheatPaddyWheat 2006-075695426507001429 2007-085955747758503048 2008-0961962493010005060 2009-10645649103010806066 2010-11742701103011003957 2011-12888826111011702542

10 This is true irrespective of cost concept used. Crops t 1 (Average during 2000- 01 to 2003-04) t 2 (Average during 2004-05 to 2007-08) t 3 (Average during 2008-09 to 2010-11) Gross Margins over MSP as % of (A 2 +FL) cost Net Margins over MSP as % of C 2 cost Gross Margins over MSP as % of (A 2 +FL) cost Net Margins over MSP as % of C 2 cost Gross Margins over MSP as % of (A 2 +FL) cost Net Margins over MSP as % of C 2 cost Cereals57766118419 1Paddy4955886713 2Wheat96251032813338 3Maize10-2033-11496 4Bajra17-1432-65811 5Barley55158237513

11 It also meant that agricultural sector benefitted from the relative shift in terms of trade towards agricultural commodities with food prices rising faster than manufactured goods. 11

12 This was also transmitted to wage workers with acceleration in growth rate of wages. Rural real wages increased at more than 6% per annum between 2008 and 2013. 12

13 The increase in wage rates also meant rising cost of cultivation

14 Cash cost is increasing faster since 2009, mainly labour, diesel and fertiliser

15 The introduction of NBS did help contain the fertiliser subsidy, largely because of the decline in P&K subsidy

16 But it was also accompanied by increasing fertiliser prices.

17 The result was decline in fertiliser consumption

18 It also led to worsening of fertiliser mix

19 The NBS did not increase domestic production of fertilisers

20 The future: The golden period of Indian agriculture is headed for difficult times. International commodity prices have started declining since the later half of this year Credit flow to agriculture has stagnated Public investment in agriculture has stagnated MSP policy and WTO obligations may lead to lower procurement

21 World food prices are declining

22 Although not so clear in Indian case, cash crops have already seen price collapse: Cotton, Sugarcane, basmati

23 If the present trend continues, the following will further add to the misery in agriculture Continued volatility in the fuel (oil) prices continue to put pressure on agricultural commodity prices Increasing urbanisation as well as demand by the non- farm sector is putting pressure on agricultural land The overall deflationary policies and growth fetishism will be the obstacle in increasing investment in agriculture. With agriculture being open to international trade, it is no longer insulated to international price volatilites. The entry of finance capital in lucrative cash crop business has meant a weakening of domestic trade measures in protecting farmers

24 What to expect in future Urea prices likely to be increased Diesel prices likely to remain high International prices likely to stay low Fear of high fiscal deficits likely to put pressure on agricultural investments as well as food, fertiliser and other subsidies Unlikely that demand increases domestically or internationally With wage rates stagnating and decline in flow of funds to rural areas, rural areas may see an increase in distress

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