Low inflation rates and dipping food prices: Where do they leave the farmer

Almost a fifth of India's consumer goods basket was in deflation zone in January. All were food items

By Joyjeet Das
Published: Wednesday 13 February 2019
Photo: Kumar Sambhav Srivastava

The dip in retail inflation to a 19-month low, as reported by the Union government on February 12, 2019, once again underscores the agrarian crisis in the country. The middle class may be worried about rising prices, but four items that can be traced back to farms showed deflation, while inflation in a few others was negligible in January.

According to Consumer Price Indices (CPI), released by the Union Ministry of Statistics and Programme Implementation, the rate of inflation was 2.05 per cent last month. These indices cover a basket of goods and services Indians spend on regularly. For ‘food and beverages’, which weighs in at 45.86 per cent of this basket, the rate was -1.29 per cent.

Such negative inflation, or deflation, denotes a fall in the general level of prices.

The ‘food and beverages’ category comprises:

  • Agriculture-linked products: Cereals and products, fruits, vegetables, pulses and products, sugar and confectionary, spices, oils and fats (which is not linked to agriculture alone)
  • Animal products: Meat and fish, egg, milk and products
  • Non-alcoholic beverages
  • Prepared meals, snacks and sweets

Of these, vegetable prices in January 2019 plummeted 13.32 per cent below January 2018 levels; the inflation rate of sugar and confectionary tanked 8.16 per cent from a year ago; and that of pulses and products were down 5.5 per cent and of fruits 4.18 per cent.

While the wholesale prices for the period are yet to be released, it should be safe to surmise from these rates that farmers and horticulturists are nowhere near doubling their income. Prime Minister Narendra Modi on January 26, 2016, had promised to double farm income by 2022.

The situation on the ground has been quite different since then, especially after the move to demonetise high-value currency on November 8, 2016. Unattractive prices have led to farmers dumping crop after crop — be it potatoes, onions or sugarcane — by the roadside.

In some parts of the country, the same was the fate of milk and the CPI rates show why: an inflation of a mere 0.78 per cent at a time when keeping cows is becoming increasingly risky. Inflation was negligible also for cereals and products (0.88 per cent) and oils and fats (0.99 per cent). Spices also remained below average (1.45 per cent).

Among animal protein items, egg prices were down by 2.44 per cent. Inflation in mean, though, was at 5.06 per cent.

Non-alcoholic beverages and prepared items’ inflation were at 3.49 and 3.48 per cent. Items in the deflation zone together make 19.28 per cent of the baskets of consumer goods and services.

It must be kept in mind that while prices of food items either fell or did not rise much, that was not the case for other components — clothing and footwear, housing, education etc.

“What the farmers buy got expensive but the prices of what they sell fell,” said agricultural activist Ramandeep Singh Mann.

Food and trade policy analyst Devinder Sharma linked the deflation and low-inflation to government policies, saying the real income of farmers is shrinking and they are being “penalised” for growing food.

“Agriculture is a victim of macro-economic policies. There has been an effort to keep food inflation low,” he said. A low inflation helps in keeping interest rates in check, which in turn helps “corporates”.

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