By Ruma Dubey
The bountiful harvest of the kharif season was eclipsed by demonetization and the farmers were left with grains but no one to buy as cash itself was in short supply.
We had proof of this in the CPI numbers of December, which at 3.41% was the lowest since November 2014. This was on the back of food inflation which came in at 1.07% v/s 2.03% in November. Doesn’t this in itself clearly show that in the peak of the kharif harvest, producers were forced to sell cheap, which in turn lowered prices at the retail level.
And now it is rabi season. Rabi or winter crops, are sown between October to February and harvested by June. And the most important rabi crop is wheat. On the other hand, Kharif crops are sown during April-July, and harvested by October, with the most important Kharif crop being paddy.
As per the latest numbers coming from the agriculture ministry, as at 27th Jan’17, the total area sown for rabi crops was over 6% (YoY) up at 63.7 million hectares. Area sown under pulses rose 11%, wheat rose by 8%, coarse cereals rose 5.5% and that for oilseeds rose 7%. The only deficit, as per the Govt is in rice where area under rice cultivation fell 15%.
We have already started seeing the effect of this data on rice prices which have been showing a steady climb up since January. Not just this lower sowing in rabi, even during the kharif season, the production quality of the harvest was very bad. Prices in North India have gone up already 28% and there, this is despite the region having a bountiful harvest. Clearly, in agriculture too, this is a speculators market and they play up the price based on the numbers released by the govt.
And therein lay the problem. Like IIP, the numbers which come from the Govt are a suspect. Have you wondered how these “area sown” numbers are gathered by the Govt? No there is no farmer reporting to any agency – there is no actual field survey or not even satellite images; the estimates that we get is purely on the basis of what the “eye see’s.” Yes, is purely gut feeling on what the eye estimates. That’s how we get these sowing numbers on which speculators play up the prices, affecting inflation, which in turn affect every decision of RBI.
How are production advance estimates made? Pretty much the same. It is guided by visual observation and then they sometimes validate with proceedings of the meetings of Crop Weather Watch Group. They also look at the water reservoir position, credit supply, rainfall, weather; all this is visual and instinct based.
Another very significant lapse is that these advance estimates simply do not include any data on horticulture, which today exceeds the production of even foodgrains and contributes 30% to value of India’s total crop sector. Why the Govt does not include horticulture data? Because there is simply no mechanism in place to collect this data.
It is indeed shocking to know that this is the kind of data on which we base all our important economic decisions – right from the Budget to RBI. Yet, the govt is doing zilch to improve data collection. This is the same blame heaped in IIP numbers but somehow, despite the govt knowing the significance of information and data in today’s world, turns a blind eye to forming a reliable data collection center. Yes, we have the Department of Economics and Statistics but it seems to be facing a budget constraints and no real motivation to work better.