[ad_1]
The Union Cabinet on Wednesday approved a sharp rise in minimum support prices (MSP) for kharif crops for the 2018-19 season to contain the distress of the agricultural sector. However, some farmer organizations argued that it was a small win for them because higher prices remained below the overall cost of production. While the decision is seen as a populist move before the badembly elections in Madhya Pradesh, Rajasthan and Chhattisgarh (major growers of kharif, oilseed and grain legumes), it also sparked fears of a rise in food inflation.
The decision will involve a tooth of Rs 150 billion on the board immediately, officials said. Sources, however, said that it was a conservative estimate and that the final figure could be more than twice as much as 350 billion rupees when factored in the price of ######################################################## Purchase of oilseeds and pulses.
ALSO READ: The rise of the government's MSP will have little impact on the crop insurance market
Interior Minister Rajnath Singh told reporters after the meeting of the Economic Affairs Committee (AECB) to double the income of farmers by 2022. "It will have an impact on the entire rural economy," he said. The government was confident of addressing any impact on inflation, he said, adding that he would not back off from taking steps to improve the situation of farmers. In response to the government's decision, shares in companies related to the agricultural sector jumped 13 percent.
ALSO READ: Experts see a 50-90 basis point rise in inflation on the MSP movement; The CPI could rise 70 basis points
The magnitude of the impact on food inflation would depend on the government mechanism to ensure that crops, other than the wheat and rice, are also purchased from farmers in consultation with NITI Aayog. know. An official announcement on the model is expected soon. "In the short term, the impact on inflation due to rising MSPs will vary from one culture to another." It will also depend on the buying mechanism, "said Shashank Bhide, director of the Madras Institute for Development Studies, in the long run, which will depend heavily on farmers' response to high levels. production and production improvement READ: MSP rise to destabilize macroeconomic variables, financial mathematics: Experts
According to A Prasanna of ICICI Securities, the overall CPI is expected to increase by 50 to 90 basis points immediately due to the increase in MSP MSPs are based on the A2 + FL cost and not on C2, a long-standing demand from A2 + FL farmer groups largely involves all costs of Inputs plus family and family work, while the overall cost (C2) includes all expenses incurred plus the imputed value of unpaid family labor and rents and abandoned interests on the land s and the fixed badets belonging to the property.The MSP set on the basis of cost C2 is much higher than that fixed on the cost A2 + FL. foment inflation, invites RBI to raise interest rates: Experts
However, in the absence of a formal purchase model for crops other than paddy and wheat, the new MSP mechanism may not translate into big gains for the final farmer. buy non-cereal crops. The common grade paddy MSP, the largest grain grown during the Kharif season, was increased from Rs 200 a quintal to Rs 1750 – the steepest of recent times.
Source link
