Gyan Pathak
The ferocious rise in COVID-19 infection and its continuing spread from the urban to rural India has put the government and the people under fear of difficult days ahead. People are worried about fall in their income and rise in inflation, while the government has become apprehensive of the growing requirement of food supply to support the needy.
The Centre has, therefore, increased its target of wheat procurement, and the FCI has opened additional procurement centres, particularly in areas with maximum wheat production or where there is a market surplus. For the current rabi procurement season beginning from April 1, 2021, government agencies have already procured 24.7 million tonnes of wheat by April 27. The target is of procuring 42.7 million tonnes as against the actual procurement of 39 million tonnes last year, which is 9.5 per cent higher. The procurement target for Punjab is 13 million tonnes, Madhya Pradesh 13.5 million tonnes, Haryana 8 million tonnes, and Uttar Pradesh 5.5 million tonnes. As of now, 39 per cent (9.6 million tonnes) wheat has been procured from Punjab, 31 per cent (7.6 million tonnes) from Haryana, and 24 per cent (5.9 million tonnes) from Madhya Pradesh.
Achieving the higher target of wheat procurement may not be difficult because the production this year is going to hit a record high at 109.2 million tonnes as per the second advanced estimate of the Ministry of Agriculture made in February. The Centre intends to procure 39 per cent of the total production as against 36 per cent last year. It is being procured at MSP of Rs 1975 per quintal, which is 2.6 per cent higher than 2020-21 rabi marketing season. It would be the fourth consecutive year to witness increase in wheat production, at least by 1.4 per cent compared to 2019-20. Increase in wheat production has been effected due to sustained increase in acreage under this crop, which increased by 3 per cent during 2020-21 in addition to 12 per cent increase during 2019-20.
The rise in business of wheat, ie increase in price plus increase in production, would thus be about 4 per cent. It would mostly be conducted during April and May, because in most of the states, the procurement commences by the first week of April and ends by May end. Only in few states such as in Madhya Pradesh it stretches until mid June and in Rajasthan until June end. Wheat is chiefly procured in Punjab, Haryana, Madhya Pradesh, and Uttar Pradesh. This year, procurement in Punjab began a little late by April 10 due to implementation of a new direct benefit transfer (DBT) system which replaced the old system of payment to farmers through commission agents. Punjab objected to the DBT system in the beginning but finally yielded to the insistence of the Centre.
The procurement strategy adopted by the Centre has made availability of wheat in lesser quantities for private traders and exports.
It may also be mentioned here that procurement of rice during the kharif marketing season 2020-21, ended on March 31, 2021, had also ended at an all-time high at 46.5 million tonnes as against 39.4 million tonnes during 2019-20, which was 18.2 per cent higher, though it was short of target by 3 million tonnes.
This scenario seems to be optimistic, however, people have become pessimistic about their household incomes and inflation, which is evident from the latest CMIE reports. Household sentiments have been infested with anxieties regarding the long-term well-being, it says. The Consumer Sentiments Index have been falling for the last three weeks touching 5.4 per cent in the week ending May 2, against 4.5 and 4.3 in the previous weeks. It is the lowest weekly index since November 2020. With a decline by 3.8 per cent in April, it registered sharpest monthly fall since May 2020.
The Index of Consumer Sentiment has two elements – the Index of Current Economic Conditions and the Index of Consumer Expectations – and both of them fell by 2.5 per cent and 4.5 per cent respectively in April, reflecting a substantial worsening of household income. The survey found 47 per cent household reporting fall in their income as against 45 per cent in March compared to a year ago. Only 4 per cent reported improved income as against 6 per cent in March. Thus, both the fall and rise in household incomes has worsened.
It may be intriguing to know that the fall in household income could not affect much the perception on buying consumer durables. About 48.1 per cent believed it a worse time to purchase consumer durables in April 2021 as against 50.4 per cent a year ago, while 6 per cent believed it a good time as against 6.9 per cent. However, a closer look at the data reveals that households with relatively modest incomes were more pessimistic.
The Index of Consumer Expectations fell by 4.5 per cent in April 2021. Expectations regarding income over the next 12 months, next year, and next five years have sharply fallen. Nearly 46 per cent households expected their income to worsen in a year’s time as against less than 10 per cent just before the outbreak of the pandemic last year. Just after the pandemic it rose to 50 per cent, but situation somewhat improved by November 2020 to 45 per cent, and by February 2021 to 43 per cent. Since then there is again a fall. The households expecting rise in income has also fallen. Such a relative pessimism reached its highest level in February and March 2021. About 45 per cent believe India’s economic conditions to worsen in a year, while 49 per cent expect status quo. Government, international agencies, and many economists have predicted improvement subject to containment of the pandemic, but among the surveyed household, only 6 per cent believed it.
Similar is the case with inflation. The first three months of 2021 witnessed a rising inflation in the Consumer Price Index which rose to 5.5 per cent in March. It is still lower than the inflation through most of 2020 that ranged between 6 and 7 per cent. That is why many economists and the RBI think it is not going to be worse than the last year. To know the people’s perception RBI had conducted a survey in March 2021 and were surprised by the result. A record 58.4 per cent of respondents expected the rising inflation to continue increasing. Only 4 per cent believed it to decline.
India cannot disregard this fear because of several reasons including its effect on human behaviour. Moreover, there are some rising threats which are identified by another CMIE report. Though the rising inflation in the first three months are still low compared to last year, the core inflation has been steadily rising which reached 6 per cent in February-March 2021 as against around 5.5 per cent. It alone indicates the presence of inflationary pressure in the economy. The resurgence of coronavirus is another risk. Gradual exit of workers from jobs, and disruption in production and supply may put additional inflationary pressure. (IPA)
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