The Hindu Business Line : Monsoon magic

Recent wet weather has helped arrest the downside risk to agricultural production. The Centre should, however, continue to be vigilant and monitor the price situation closely.

We are now witnessing what healthy transformation a fortnight of widespread heavy rains can bring about in agriculture. The spectre of mid-season drought that haunted the country following the three-week long dry spell in July (when, seasonally, rains should have been the heaviest) has given way to cautious optimism on the farm front. The welcome precipitation and the latest Agriculture Ministry acreage data raise hopes of an improved kharif 2008 output of major field crop s though it may still be lower than the record kharif 2007 harvest. Recent wet weather has helped arrest the downside risk to agricultural production, which by itself should boost the confidence of stakeholders — growers, industry, trade and consumers, not to speak of the government. However, with six weeks of the monsoon left, it is imperative the crops get another round of rains. Despite improved overall farm prospects, early signs point to a decline in some crops, especially sugarcane, cotton and pulses. Prices of these commodities are expected to stay strong over the coming months, not only because of smaller domestic harvests, but also bullish overseas price signals.

There’s some good news too. The Asian rice market has eased in the last two months with an expected rebound in production, while the Indian paddy crop has shaped well so far. On the vegetable oil front, palm and soya oils have eased considerably with improved production prospects across the world. Overseas price signals are already being transmitted to the domestic market via large-scale imports . So, it is going to be a mixed bag as far as agricultural output and prices are concerned. To fight food inflation, in recent months, the government adopted trade and tariff policies that restricted exports and encouraged imports.

It would be logical to continue the liberal import policy for essential food items. Domestic producers’ demands to re-impose / raise customs duties should be treated with caution. Consumers, especially the poorer sections, deserve support and relief from high prices. A review of embargo on export of certain commodities may also be in order – for instance, in the non-basmati rice category, why should premium rice not be allowed for export? The decision to supply edible oil at subsidised rates through the public distribution system is welcome. Together with falling open market prices, PDS supplies will put pressure on the private trade to work with lower margins. It will benefit consumers. The logic can be extended to pulses. The trading operations of government parastatals need strict monitoring. Pulses imports by government agencies can be routed through the PDS. With crude oil and metals markets too softening, there is a glimmer of hope that inflation may decline over the next few weeks. While it is a comforting thought, there is absolutely no room for complacency. New Delhi should continue to be vigilant, monitor the price situation closely and initiate preventive steps based on advance signals.

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