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Three catastrophic international occasions — the coronavirus pandemic, the Russia-Ukraine warfare, and the local weather disaster — have made seen sources of precarious resilience and fragility in India’s rural economic system. Now, as India grapples with rising meals inflation and slowing rural demand, policymakers should cope with the dilemmas posed by the agricultural economic system’s resilience and fragility to design a sturdy coverage response, one which goes past advert hoc export bans.
Amid the pandemic-induced financial disaster, the agricultural economic system was a web site of resilience. In 2020-21, agriculture was the one sector of the economic system that remained sturdy, rising at 3.3%. Crucially, it offered the nation with its most resilient security internet. A slew of coverage measures enhanced minimal help costs (MSPs) and procurement saved granaries nicely stocked and the growth of the general public distribution system (PDS) ensured fundamental meals safety. In 2021-22, the sale of rice and wheat by way of authorities schemes was as excessive as 105.6 million tonnes. Furthermore, an excellent monsoon and two successive bumper harvests coincided with rising international costs after international lockdown restrictions started easing. Collectively, this created an ideal situation for strong agri-commodity exports. In 2021-22, farm exports crossed $51 billion.
Together with the supply of fundamental meals grains, agriculture was additionally India’s major employer. The Centre for Monitoring Indian Economic system data that between 2019 and 2022, agriculture added 11 million new jobs whereas the remainder of the economic system shed 15 million jobs. The federal government’s Periodic Labour Power Survey (PLFS) reveals that in 2019-20, agriculture added 32.72 million jobs over 2018-19. Agriculture, lengthy thought-about the employer of final resort for policymakers, emerged as the one employer and first security internet for hundreds of thousands of Indians amid the pandemic.
Nevertheless, for many, India’s agriculture gives subsistence employment moderately than a sturdy substitute for non-farm revenue. Removed from being insulated, the largely casual rural economic system was devastated by Covid-19. Rural wages, significantly non-farm wages, declined sharply by way of the pandemic and are but to get better. Declining incomes accelerated demand-destruction for proteins — milk, eggs, fruits, and greens — a pattern that started earlier than the pandemic with the financial slowdown. The gross sales of liquid milk by dairy cooperatives, for example, declined by 2.6% in 2020-21 from the earlier 12 months; examine this with an annual progress of 5.9% in 2018-19.
The declining demand for proteins is a marked shift from the 2000s when rising incomes resulted in dietary diversification, creating alternatives for crop diversification. Nevertheless, India’s agricultural coverage has incentivised the overproduction of cereals and sugarcane whereas discouraging diversification. Mockingly, this perverse coverage was a supply of power by way of the pandemic, guaranteeing meals safety amid deepening financial vulnerability. In 2021, as India emerged from the pandemic, international provide chain disruptions and local weather shocks triggered a steep rise in commodity costs. The Russia-Ukraine warfare exacerbated this.
However past headline numbers, the dynamics of meals inflation want unpacking. Calculations by the Centre for Coverage Analysis’s Harish Damodaran and Samridhi Agarwal present that until March, inflation was pushed primarily by edible oils (common inflation since April 2019-2022 is 15.8%) whereas cereal and sugar costs remained insulated from worldwide worth fluctuations. This was resulting from surplus cereal manufacturing, incentivised by coverage, which, in flip, ensured meals safety whilst incomes fell.
The local weather crisis-induced heatwave of March uncovered the fragility of extreme reliance on cereals. The heatwave resulted in a lack of crop yield, thus contributing to a rise in cereal inflation. This, mixed with hovering international wheat costs, has resulted in a major discount in wheat procurement. Because of this, official wheat procurement is prone to halve from final 12 months’s report of 43.3 million tonnes. As soon as once more, the sources of resilience in rural India are additionally liable for its fragility, and present inflation will put better stress on the agricultural poor.
The pandemic, the warfare, and the local weather shock have resulted in moments of disaster that expose the numerous contradictions within the coverage strategy to the agricultural economic system. On the one hand, our cereal-heavy manufacturing regime performed saviour within the pandemic by guaranteeing meals safety. However these traits left it fragile and weak to local weather shocks and warfare. Furthermore, it uncovered the actual stress that policymaking should cope with — the necessity to stability rising farm incomes with meals safety wants in a weak economic system, whereas concurrently guaranteeing long-term environmental resilience. For the second our coverage response has failed on this balancing act selecting as a substitute to impose export bans and restrictions — which is able to deprive farmers and merchants of wanted revenue positive aspects and dangers market destruction, within the identify of meals safety whereas ignoring diversification wants.
The current conundrum is a reminder of the urgency for reframing the paradigm of policymaking away from a piecemeal, knee-jerk disaster administration framework to 1 that invests in long-term threat administration and balances tensions. A robust rural economic system is the spine of India’s meals and local weather safety, and it’s the solely path for disaster administration in an more and more weak international economic system.
Yamini Aiyar is president and chief government, Centre for Coverage Analysis The views expressed are private Particular due to Harish Damodaran and Mekhala Krishnamurthy
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