Inflation at record low increases farmers’ woes

Sanjeev Sharma

Tribune News Service

New Delhi, June 12

Retail inflation fell to a its lowest in May since 2012 at 2.18 per cent as food prices eased sharply in what is seen as compounding rural woes and stoking farmer unrest and demand for loan waivers.

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The overall food inflation was in negative territory at (-) 1.05 per cent during the month as prices of vegetables declined by 13.44 per cent and prices of pulse declined by 19.45 per cent.

Experts say that while fall in food prices is good news for policy makers and consumers, it is not good news for farmers. Sunil Kumar Sinha, Principal Economist, India Ratings & Research (IRR) said that prices of pulses in some harvesting areas are already lower than the minimum support price and thus farmers are not getting full benefit of increased production, leading to farmer unrest and increasing clamour for farm loan waiver.

Read: Generate own funds, Jaitley tells states going in for farm loan waiver

“While decline in food inflation is good news for policy makers and consumers, it is not very good news for farmers and especially vegetable and pulses farmers”, he added.

Both vegetables and pulses inflation declined sharply in May 2017, partly due to base effect and partly due to increased production. Food prices experienced deflation in May 2017 (-1.05%), for the first time after January 2012 (-0.2%).

Finance Minister Arun Jaitley made it clear on Monday that the states who want to introduce farm laon waivers have to generate resources on their own. 

When asked about Sunday's announcement by the Maharashtra government to do away with farmers loan, Jaitley made it clear that there will be no funding from the central coffers.

"I have already made the position clear that states that want to go in for these kinds of schemes (farm loan waivers) will have to generate them from their own resources. Beyond that the Central government has nothing more to say," Jaitley responded to a question about loan waiver to farmers. The RBI has already warned of fiscal slippages due to farm loan waivers.

Industrial production growth slipped to 3.1 per cent in April as effects of demonetisation continued to linger in the new financial year and cast a shadow on poor show by manufacturing, mining and power sectors.

India Ratings said the 3.1 per cent IIP growth in the first month of FY18 is not very encouraging. The agency said this could be due to the lagged effect of demonetisation, which may play out even in the first quarter of FY18 and had pulled down the overall industrial GDP growth to 3.1 per cent in 4QFY17.

ICRA said that businesses in some industries may choose to trim their inventory levels during the transition to the GST, which would mildly dampen production in the remainder of Q1 FY2018. In ICRA's view, IIP growth in May 2017 is likely to be considerably lower than the healthy 8 per cent recorded in May 2016.