[Editorial Analysis] An answer to rural distress

Mains Paper 3: Economy

Prelims level: Agricultural Produce Marketing Committees

Mains level: Major crops cropping patterns in various parts of the country, different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints.

Context

• The most pressing problems facing the Indian farmer are the persistently low market prices.

• From onions to potatoes and pulses to oilseeds, prices of most crops are much below expectations and normal trends.

• Ideally, the solution lies in holistic and broad-based agri-market reforms. The stranglehold of the Agricultural Produce Marketing Committees (APMC) needs to be broken, the Essential Commodities Act (ECA of 1955) requires reforms.

Initiatives taken by the government

• The negotiable warehouse receipt (NWR) system has to be scaled up, value-chains based on the Amul model are needed for most crops, land laws need to be less restrictive, contract farming should be promoted and agri-exports are in need of a conducive environment to grow.

• The prime minister has initiated reforms in some of these areas; they need to be broadened before they can deliver.

• However, these reforms entail a long gestation period and with the Lok Sabha elections barely four months away, demands for quick-fix solutions are increasing.

What are the solutions?

• Three significant solutions have been doing the rounds.

• Higher minimum support prices (MSPs), loan waivers, and direct income/investment support.

• In this article, we evaluate the three to identify one that can be a winner, both politically and economically.

• For political acceptance, we evaluate the scheme for its reach among the targeted beneficiaries, the farmers, and, for economic viability, we compare costs and benefits.

Conclusion

• The PM promised a loan waiver and higher MSPs for 23 commodities.

• There was a difference, however, in the MSP increase formula offered by the two parties.

• While the Congress promised an MSP increase of 50 per cent that is, the comprehensive cost, PM Modi promised the same increase.

• That is the paid-out costs plus family labour. It may be noted that it is about 38 per cent.

———————————————

Prelims Questions:

Q.1) Which of the following provides a safety valve against unanticipated liquidity shocks to the banking system?

A. Reverse Repo Rate

B. Open Market Operations

C. Cash Reserve Ratio

D. Marginal Standing Facility

Correct Answer: D

Mains Questions:

Q.1) An income transfer policy combined with direct cash transfer is the best way to help the farmer. Critically examine the statement.

Share article