Day 11 – Q 2.While low inflation is desirable in itself, the impact on farmers also needs to be taken into account. Comment. What policy measures can be taken in this regard? Suggest.

2. While low inflation is desirable in itself, the impact on farmers also needs to be taken into account. Comment. What policy measures can be taken in this regard? Suggest.  

हालाँकि कम मुद्रास्फीति अपने आप में वांछनीय है, किसानों पर इसके प्रभाव को भी ध्यान में रखना होगा। टिप्पणी करें। इस संबंध में क्या नीतिगत उपाय किए जा सकते हैं? सुझाव दें।

Introduction:

Low Inflation is a phenomenon when the prices of goods and services do not increase rapidly. This situation is not much harmful for any economy because it could be controlled by the adoption of certain measures unlike high inflation which is almost uncontrollable. 

Body:

Low inflation contributes towards economic stability which encourages saving, investment, economic growth, and helps maintain international competitiveness.

Why low inflation is desirable: 

• Increases investment: If inflation is low and stable, firms will be more confident and optimistic to invest, this will lead to an increase in productive capacity and enable higher rates of economic growth in the future.
• Competitiveness: Low inflation means countries export relative more competitive
• Stability: Firms can predict future costs and prices
• Real savings: Low inflation prevents saver seeing fall in real value of savings
• Prevent boom and bust cycle: High inflationary growth tends to be unsustainable
• Interest rates: A low inflation helps in keeping interest rates in check, which in turn helps corporate

Impact on farmers due to low inflation: 

• Lowering food prices mean weakening rural incomes and rural demand. Lower income increases debt burden on the farmer, which constitutes a vicious cycle in which the farmer is trapped, leading to farmers’ suicide.
• At lower rates of inflation, the price received by farmers for their products are comparatively lower than normal periods. Ex: Farmers in Shahganj, MP were forced to throw their tomatoes on roads due to unremunerative prices.
• Prices paid by farmers for various inputs decreases slower than the prices they receive for their products, thereby the terms of trade for farmers deteriorate at lower levels of inflation.

Policy Measures:

• The government announced new minimum support prices (MSPs) for kharif crops to ensure that farmers get 50% returns over costs. 
• The Cabinet Committee on Economic Affairs has given its approval for Green Revolution – Krishonnati Yojana in agriculture sector.
• Recommendations of Ashok Dalwai Committee on doubling farmer income must be taken into consideration.
• Krishi Kalyan Abhiyan was launched by Ministry of Agriculture and Farmer Welfare with an aim to aid and advice farmers to improve their farming techniques and raise their income.
• The government launched an umbrella price support scheme named Pradhan Mantri Annadata Aay Sanrakshan Abhiyan to ensure farmers growing pulses and oilseeds receive remunerative prices.
• PM-KISAN- To provide income support to all Small and Marginal landholding farmer families having cultivable land.

Conclusion:

Usually, low inflation has many benefits, which help improve the economic performance of the economy, however in some circumstances keeping inflation low may be unsuitable for the economy. Therefore, the government should perhaps aim for low inflation but have a degree of flexibility if this appears unsuitable to the current economic climate.