For the cash-dependent Indian farm sector that was hoping for a recovery on near normal monsoon this year after two consecutive droughts, the demonetisation and a resultant currency crunch, which coincided with the kharif harvest season, has dealt a major blow, aggravating the hardships of not only farmers, but also of the labourers dependent on the sector for their livelihoods.
Farmers who grow perishables, mainly vegetables, were the worst affected by the cash crunch compared with their counterparts who produced foodgrains, cereals and cash crops such as cotton and sugarcane. With no option to hold back their produce, growers of vegetables such as tomatoes, cabbage and cauliflower, among others, were seen resorting to distress sale across key growing regions.
Production cycle
This may disturb the next production cycle as vegetable cultivation is input intensive in nature and farmers, reeling under the impact of losses caused by the distress sale, may prefer to go slow on taking up fresh plantings.
Further, the scrapping of high value notes did disrupt trading at the agriculture markets impacting the market arrivals of various commodities, including cotton, soyabean and maize among others as cash shortage with the traders affected payments to farmers.
However, left with no other option of accepting payments through cheques and RTGS, farmers have been slowly bringing their produce into the markets. The market arrivals are still lower than last year. Lower arrivals of commodities such as cotton did fuel a short-term shortage pushing up the prices in the past few weeks to around ₹41,000 per candy (356 kg), an unusual trend during the harvest season. However, with the pick-up in arrivals, prices are seen easing now and hovering around ₹39,000 a candy.
Except for segments such as sugar and dairy that are relatively organised and where payments are credited into the producers’ accounts by the processing industry, all other sectors, including poultry and plantations among others, are reeling under the impact of the currency crunch. The cash crunch has not only elongated the credit cycles, but also brought back the age-old barter system in several areas as the rural populace try to deal with the crisis. Also, the ongoing crisis has brought a large section of farm labourers, especially in the plantation sector, under the ambit of banking.
Sowing picking up
Though the rabi plantings were initially impacted by the after-effects of demonetisation, the pace of sowings has picked up in the past two weeks and the acreages now are seen higher than last year. The pick-up in sowings may help sustain the foodgrain output levels for the year ahead. The cash crunch has impacted the consumption pattern in the rural areas with the populace hesitant to spend on non-essentials. Even farmers are holding back their spends on new initiatives such as drilling a borewell or purchasing a tractor, among others.
Market players feel that normalcy could be restored only after the currency supplies improve in the rural areas. Lack of adequate banking facilities in the rural areas and market yards has also added to the woes of the growers.