Budget 2020: Rising food inflation is good for economy, not just farmers; here’s what govt must do

Budget 2020-21: Low consumer price food inflation in the Narendra Modi government’s first term has hit rural income which also later showed up in the sales of FMCG companies, tractors and agro-inputs, among others. Budget 2020 India: Currently, farmers are getting decent amounts for onions, potatoes, groundnut, maize, cotton and most pulses. Union Budget 2020: The rise in food inflation can do good to not just farmers but the economy as well. Amid improving farm rates owing to inflation, a ban removal on exports of farm commodities such as onion, potato, pulses and sugar can consolidate already improving sentiment and in turn provide a way towards economic recovery, The Indian Express reported. With just two days left for Finance Minister Nirmala Sitharaman to announce the Budget 2020, the agriculture sector can benefit highly from scrapping of all provisions in the Essential Commodities Act and state-level Agricultural Produce Market Committee laws which pertain to restrictions on domestic sale, stock holding, movement and export of farm commodities, the newspaper said. The same is also expected to lever investments in agro-processing and cold storage supply chains. Watch Video: What is Union Budget of India?Low consumer price food inflation in the Narendra Modi government’s first term has hit rural income which also later showed up in the sales of FMCG companies, tractors and agro-inputs, among others. Consumer prices have a direct link with farm incomes; for instance, a Rs 5/kg price increase in sugar translates to an additional income of Rs 33,000 for a farmer who owns a one-hectare farmer harvesting 80 tonnes of cane, which yields 8.8 tonnes of sugar at 11% recovery, according to the Rangarajan Committee’s formula. Higher dairy prices, in turn, help dairy farmers. According to a recent report from Motilal Oswal, “higher inflation is actually good for the farming community, as it is a reflection of the higher prices fetched for their output”. The same helps lever rural demand which, in turn, is instrumental in spurring growth. Currently, farmers are getting decent amounts for onions, potatoes, groundnut, maize, cotton and most pulses. The situation of dairy farmers has also improved of late and Maharashtra dairies are now paying Rs 32-33 for a litre of cow milk while earlier they were procuring the same quality milk for Rs 9-10 lesser. The annual retail food inflation has soared during PM Narendra Modi’s second term. From 1.8% in June 2019, the same hiked to 14.1% in December 2019. Similar trends were also observed in the WPI inflation in food articles which jumped from 7.3% to 13.2% and from 5.1% to 7.7% for non-food agricultural articles. 

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