The Hindu Business Line : Farm output on a low

THE SOUTH-WEST MONSOON appears set to withdraw after the half-hearted revival that brought belated but welcome rains all over the country in August. As at the beginning of September, rains in 12 out of the 36 meteorological sub-divisions were in deficit, while the all-India area weighted rainfall was 10 per cent below normal. Important agriculture regions that got deficient rains (20 per cent to 59 per cent below normal) included Punjab, West Rajasthan, West Uttar Pradesh, Vidharba and Marathwada (in Maharashtra), Telengana and Rayalaseema (in Andhra Pradesh), Tamil Nadu and Kerala. At the same time, across the country, kharif crops are fast maturing. Indeed, in some regions, harvest of early sown crops has begun. But, as they say, the grain is not yet in the barn. And it is rapidly becoming clear that the output of major crops, including rice, coarse cereals, pulses, oilseeds and sugarcane, will fall considerably short of the target set by the government. The anticipated overall decline in output this season could vary from 5 per cent to 20 per cent for different crops. Only reports on cotton are encouraging; the crop has fared well despite initial concerns. To be sure, the situation is not as scary as the 2002 drought season; but it is not as positive as in 2003. No doubt, there will be some supply tightness.

Two issues that arise out of this deserve serious consideration. Unlike in the past, lower farm output is unlikely to result in serious shortages and higher prices. Removal of restrictions on imports and domestic trade, easier credit access, softer interest rates, hedging facility and a not-so-attractive risk-reward ratio are expected to combine to check unfettered speculation. More important, farm-gate prices may be pressured by softer global prices for a number of commodities including cotton, oilseeds and coarse cereals. Over the last two months, encouraged by bright world production prospects, international agri-commodity prices have moved considerably down from the highs of last year. Because of the increasing integration of India with the global market, domestic prices are expected to be largely in line with international trends. This is a positive for commodity processors, user-industries and consumers. But care is needed to ensure that farm prices do not get depressed unduly.

A close monitoring of farm-gate prices is desirable. State agencies should be put on alert and must be ready to intervene, should conditions warrant. As the combination of lower output and depressed prices is sure to hurt wages, a serious effort to contain the repercussions of an imminent fall in rural incomes is necessary. Strengthening of the public distribution system and the various welfare programmes should receive priority. Also deserving attention is the next crop — rabi. Efforts to maximise farm output in the ensuing planting season — mainly of wheat, pulses and oilseeds — should begin now. The Centre and the States must work in tandem to ensure timely supplies of inputs and credit. Tepid farm growth is sure to tell on GDP numbers for 2004-05. The Government has been professing primacy to agriculture. It will be on test over the next several months.

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