The recent rise in inflation figures to a record high had made government and the central bank to come out with several policies (fiscal and monetary) to contain the rising inflation. Several commodities were banned from trading in futures trading like, potato, chana, rubber and soya refined oil. Previously, the government had also banned many other commodities like wheat, turmeric and so on. It had a notion that futures trading in agricultural commodities lead to a rise in prices in the spot market and thus, rise in inflation. Though, the committee set up by the government to study this notion (Abhijit Sen Committee) said that it didn’t found any conclusive evidence to prove that trading in futures market lead to rise in the prices of the commodities in the spot market and vice versa. Still, government continued with the ban of certain commodities.

Often, inflation has been projected as a bad for a growing economy. But, a steady and healthy rise in inflation is a must for the fruits of economic development to reach every quarter of the population. There are large sections of people who could benefit from the rising inflation. But, the government ensures that that does not happen. To appease a certain section of population, it sacrifices the benefits that could be received by other section. Whenever inflation figure moves up, government bans export of several food items like wheat and rice or announces some policies that badly affect farmers. It never allows its farmers to benefit from the rising prices. Indian farmers never think of producing good crop and sell it outside to gain more money. They are never allowed the opportunity to cash in. The government primarily does this to appease the urban population and ensure that in the election the ruling party wins by securing more votes from this population. It is irony that more than 60 or 70 per cent of India stay in villages and most of them are engaged in farming activities.

There is Minimum Support Price (MSP) by which a government says that it will buy their produce at a price that is either at the MSP or at a higher price determined by market forces. But, if we look at the past incidents, we will find that it never allows market participants to cash in. There are several blockades like railways refusing to allow them to transport their stocks and so on. Moreover, the MSP is only for big farmers having large produce owing to large lands. In India, barring a few per cent of farmers, others have relatively very small amount of produce. These farmers either sell their produce to an agent or in a market in nearby city. Apart from this, there are huge taxes on export of certain goods so that the farmers sell it in the domestic market just to keep inflation under control. The recent policies of government in certain agri -sector show how government is anti-farmer. It is high time for the government to change its agri-policies. It should learn from global scenario and allow farmers to produce more and find the market for that produce.

The government has also announced a debt waiver to a tune of Rs.70,000 crore for the farmers. But, people are yet to find out what happened to that waiver. The fact is that farmers hardly get the benefit of such waivers and when they get an opportunity to sell their produce at a higher price, government intervenes in the name of inflation. Others enjoy the real benefit. If we look at the farm loans, it presents a dismal picture. Presently, it is mandatory for the domestic scheduled commercial banks, expect regional rural banks (RRB) to allocate 18 per cent of their total loans and advances as well as non-SLR investments towards agriculture sector. Advances to the agriculture sector can be in the form of direct finance or indirect finance. Indirect finance is limited to a maximum of 25 per cent of the specified 18 per cent, i.e. 4.5 per cent of total loans and advances for agriculture sector. So, banks are not suppose to increase their indirect agriculture lending beyond the maximum 25 per cent of their total agriculture advances as priority sector advance. In reality the picture is different. While the public sector banks more or less remain within the prescribed limit, the private sector banks most often are found to breach the maximum 25 per cent as indirect finance. What this means is that poor farmers who genuinely need funds for their seeds and other agriculture expenses are denied loans. Government needs to ensure that all the scheduled commercial banks in India, both public and private do their needful so that these farmers who are the backbone of our country are able to get loans whenever they require. The huge success of micro-finance institutions in different parts of India proves that genuine farmers need genuine access to credit.

There had been a decline in India’s GDP growth for the first quarter in this fiscal year and the projections from various quarters too, is bad. So, government should make sure that at least agriculture sector is not affected by ensuring that farmers get cheap loans on time, making fruits of development reach them, and allowing farmers to cash in with the rising prices. Rising prices can act as motivational factors for increasing acreage and yields.

Originally posted at: www.singhsanjay.blogspot.com