India is grappling with falling rural demand aggravated by unseasonal rains that threaten to destroy what could have been a bumper crop year.
Speaking about the plight of Agri community, Ashok Gulati of ICRIER, said India never had a policy to deal with such emergencies though talks have been going on for a while. Dr Gulati categorized the problem in two parts: One, grain damage and Two, Rabi crop (wheat) damage. He says for the second part of the problem, the government can liquidate its stock and keep cereal prices constant. "We have ample stocks even if Rabi crop is damaged by 5-10 percent."
However, for first part, there is no visible solution. He chuckles at the Wholesale Price Index (WPI) figure which came in at negative 2.06 percent and firmly displaces the myth that inflation in India is declining. "The food articles component in the WPI has risen 20 percent, vegetable, pulses, fruits etc prices have all risen by 15 percent each. . The inflation rates are very-very high and the government is yet to come out with a sustainable plan," Gulati asserted.
Joining in the discussion, Balram Yadav, MD, Godrej Agrovet and Sameer Tandon, Head - National Sales for tractors at Escorts Agri Machinery agreed that the ground situation was alarming.
According to Yadav, initial estimates indicate that Maharashtra alone has Rs 2,500-3,000 cr worth of crop damage. "Maharsahstra is the worst impacted state in the country and the compensation announced can barely cover the losses," feels Yadav
Meanwhile, tractors, which are integral part of agriculture, is seeing suppressed sales for last two quarters. Tandon says the industry will be down by 25 percent this quarter and end the fiscal with a 13 percent year on year decline.
"Agricultural profitability is shrinking since last three years and the policy making circles need to wake up," Dr Gulati said while countering suggestion that fall in rural wage is somewhat arrested.
Below is the transcript of Ashok Gulati, Balram Yadav & Sameer Tandon's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: Access the damage for us and does this mean that we have to grapple with an increased fall in the rural demand a longer and deeper fall in rural demand?
Gulati: The exact estimates of damage are still under assessment by the government. Whatever little we could gather from our own trips to the field it ranges widely from certain districts where a 20-25 percent damage is there, others is 5 percent, others is even 30 percent and so on and so forth depending upon crops and regions. Now we will have to divide this whole thing into two parts. One is the grain damage and that is the wheat of the rabi. There I would say although in some states the damage is more than others Punjab where we visited personally and drove about 400 kilometers into the farmer's fields and others I was some what relieved the damage, you know when a farmer loses crop for him everything is gone. So the issue of how do we compensate that particular farmer is one big issue in the country because insurance has not taken off to the extent that we want.
However the other issue at a larger level for the economy is what will happen to the basic staple prices. That is an issue, we also visited some of the silos and there is ample stock with the government. What government needs to do is be proactive in liquidating its stock. So whenever there is a damage or scarcity in the production side you need to liquidate your stocks. So that if the government wants it can keep the sale prices constant, inflation rate zero if they want it. It is all dependend on government.
The problem is going to come up in vegetables, fruits and may be in pulses because that is where government is not active. For years reforms are being talked about to what sort of mandi system and what sort of reforms are needed and you need to build value chains, you need to invest there for storages and so on and so forth that has taken a back seat. The country is paying through its nose. Every time there is a little damage the spike in the price is much more. So you will see the vegetable prices although the Wholesale Price Index (WPI) data that has come for February you may say over all in minus 2.6 percent but if you look at food it is about 7 percent food articles and vegetable is 15 percent, fruit is 15 percent, pulses are 15 percent so where the poorer are going to be hit. Inflation rate are very high. I think the government has no strategy no plan on that to come down and do something on a sustainable basis.
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