This financial year 2018-19 could reportedly be the worst year for farm incomes in 18 years. According to a Hindustan Times report, in the Wholesale Price Index (WPI) data for December released on January 14 by the ministry of commerce and industry, the subcomponent for primary food articles has been negative for six consecutive months beginning July 2018, indicating falling prices.
WPI, per the HT report, is a good indicator of farm-gate prices as farmers sell their products in wholesale rather than retail markets. The WPI subcomponent for food components was -0.1 per cent in December. It was -2.1 per cent, -4 per cent, -0.2 per cent, -1.4 per cent and -3.3 per cent the five months before that. The report added that the disinflation in farm prices has led to a collapse in nominal farm incomes.
Along with that, disinflation in food prices may also have a massive effect on the Indian economy — fall in nominal rural incomes due to falling prices and low agricultural wage growth can affect consumption demand in the economy.
Praveen Chakravarty, the chairman of the Congress data analytics department, speaking to HT, said, “The disinflation in food prices shows that terms of trade have worsened for agriculture. This also underlines the fact that the crisis in the rural economy is of incomes and not wealth,” adding, “The government thinks that it can address the rural crisis by aiding wealth creation by promoting construction of houses and toilets. This is not going to work and it is also too late for the government to address the crisis in farm incomes.”
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