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What does a bumber kharif crop mean for the economy?

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What is it?

With the summer (kharif) sowing picking up across the country on account of improved distribution of monsoon rain during the last fortnight of August, another bumper harvest is expected this season, if weather conditions continue to be conducive. While the increase in crop acreage has eased the fear of a fall in grain production, the bright harvest outlook also throws a challenge to the government to deal with a situation of abundance of produce. A good kharif harvest means an increase in supply, which could result in a drop in crop prices, hitting farm income.

Agriculture and Farmers’ Welfare Secretary S.K. Pattanayak, anticipating a good harvest, recently pointed out that the challenge with a “situation of abundance” before the government is that of maintaining food prices at levels that ensure farmers get their due profits, while not depriving consumers of the gains of a bumper harvest.

This year, summer crops have been sown on nearly 1,053 lakh hectares against 1,046 lakh hectares during the corresponding period in 2017-18, as per data released by the Agriculture Ministry on September 14. Though the cumulative monsoon rain across the country has been 8% lower than the normal as of September 14, the higher acreage is being attributed to better distribution of rainfall. The National Collateral Management Services, a private post-harvest management company, last week released its second advanced estimates for the 2018-19 kharif crop. It has pegged the total grain production at 136.75 million tonnes. The estimate is just 3% less than previous year’s record harvest of 140.73 million tonnes.

Why does it matter?

A bumper harvest will help the government fill its granaries for the Public Distribution System and reduce hunger and malnutrition. However, with the increased supply of crops (cereals and pulses) other than the foodgrain, which are procured by the government, the fall in prices can never be ruled out, which is associated with the economics of demand and supply. A bumper crop is expected to benefit the consumer. For farmers, it is a different story. The key issue is that a very small proportion of the produce is procured by government agencies. The bulk of the output is purchased by private players. The system of selling the produce is such that the intermediary gains more and the producer and the consumer both suffer. While the primary producer (farmer) gets low prices, consumers often have to pay high rates.

What does it mean?

After harvesting, the crop goes out of the hand of the primary producer (farmer) and is largely usurped by the intermediary. When the primary producer’s share of the pie is declining, the sustainability of farmers come under threat. This is the trend with bumper crop prices, especially those of pulses, vegetables and fruits, crashing at the time of harvest and sky-rocketing in the lean period. Marketing institutions are very weak across the country, and innovative reforms are lacking in this area.

What next ?

Farmers’ organisations have come together to demand a better deal for primary producers, as their survival is at stake. Lakhwinder Singh, an agriculture expert and professor of economics at Punjabi University, Patiala, points out that a large number of small and marginal farmers are becoming highly distressed owing to the system of market institutions squeezing them both on the input and output side. “The interlinked transactions, such as the informal credit market, further make them victims of a debt trap. Largescale suicides of farmers across India is testimony to this. To make farming a healthy business, the government needs to invest in the agriculture sector to improve input and output chains, where the value addition should be reaped by the primary producer [farmer],” he says. Increased investment is urgently required to revamp a dying agriculture sector and make it inclusive and sustainable in the long run.

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Printable version | Dec 13, 2019 7:33:36 AM | https://www.thehindu.com/business/agri-business/what-does-a-bumber-kharif-crop-mean-for-the-economy/article24956245.ece

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