Warning of a repeat of pulses-like crisis in other agri-commodities, the pre-budget economic survey today asked the government to be “vigilant” to prevent spike in prices of items like sugar, milk, potatoes and onion.
The Economic Survey 2016-17 pegged agriculture and allied sector growth at 4.1 per cent this fiscal on account of good monsoon from 1.2 per cent last year but said there is less chance for the sector to give an extra boost to GDP growth next year.
It also pointed out the challenges facing the sector like regulation on farm trade, issues related to IPR in seeds, frequent recourse to stock limits, among others creating “uncertainty” for farmers.
“Demonetisation could also affect supplies of certain agricultural products, especially milk (where procurement has been low), sugar (where cane availability and drought in the Southern states will restrict production), and potatoes and onions (where sowings have been low),” according to the pre-budget document tabled in Parliament today.
“Vigilance is essential to prevent other agricultural products becoming in 2017-18 what pulses was in 2015-16 in terms of supply deficiencies and consequential higher inflation,” it said.
Stating that it is too early to predict prospects for the monsoon as well as farm production in 2017, the Survey however said, “But the higher is agricultural growth this year, the less likely that there would be an extra boost to GDP growth next year.”
Highlighting the challenging areas in the sector, the Survey said, “The agriculture sector is entwined in regulation, a living legacy of the era of socialism. While progress has been made in the last two years, producers in many states are still required by the Agricultural Produce Marketing Act to sell only to specified middlemen in authorised markets (mandis).”
And when this system nonetheless generates price increases deemed to be excessive, the Essential Commodities Act is invoked to impose stock limits and controls on trade that are typically pro-cyclical, thereby exacerbating the problem, it observed.
Frequent recourse to stock limits and controls on trade in agriculture, which draws upon the antiquated Essential Commodities Act, are creating uncertainty for farmers, it noted.
According to the Survey, protection of intellectual property rights, for example in seeds, remains a challenge.
In the fertiliser sector, the Survey said, “Where it is proving easier to rehabilitate unviable plants in the public sector rather than facilitate the exit of egregiously inefficient ones.”