Farm distress to feature big in next week's Economic Survey

Chief economic adviser Arvind Subramanian

Part-II of the official Economic Survey for 2016-17 will focus on the crash in prices of farm produce, among other topical issues, when it is presented in Parliament next week.

It will contain more data and less commentary compared to the one presented on January 31. Even so, it will focus on some relevant macro economic themes -- farm sector, Monetary Policy Committee's (MPC's) inflation targeting, goods and services tax (GST), the twin balance sheet problem, urban planning reforms.

The current agriculture scenario could figure prominently. Chief Economic Adviser Arvind Subramanian (who prepares the Survey) has publicly spoken of his aversion to farm loan waivers as a solution, which could find a good amount of mention in a chapter on the sector. The CEA's earlier report on rejuvenating pulses' cultivation and his non-traditional suggestions could also find mention.

There has been a sharp and sudden drop in prices of many agricultural commodities, primarily vegetables and pulses, in many parts. This has triggered nationwide protests, in the backdrop of back-to-back droughts. The fall in prices also pushed farmers towards debt in many parts. In pulses, the crash was to below the government's Minimum Support Price. The protests turned violent in June, when six agitating farmers were shot dead in Mandsaur district of Madhya Pradesh in trying to enforce a bandh.

The Survey is also expected to cover issues such as the benefits and impact of the recently implemented nationwide GST, 'smart' cities and urban planning, demonetisation, industrial production and trade.

And, a substantial portion is expected on the MPC's holding of rates when headline retail inflation is at an all-time low. As reported by Business Standard earlier, the Survey's presentation had been delayed after some sections in the top rung of the government had objected to Subramanian's strong criticism of the MPC's inflation modelling and policy decisions. Some changes have since been made to the document, it is understood.

Under the survey

* It will contain more data and less commentary compared to the one presented on January 31

* Will focus on some relevant macroeconomic themes — farm sector, MPC’s inflation targeting, GST, twin balance sheet problem, urban planning reforms

* Expected to cover the benefits and impact the GST, ‘smart’ cities and urban planning, demonetisation, industrial production and trade

On June 7, Subramanian reacted strongly to the MPC's decision to hold the repo rate. "In recent times, seldom have economic conditions and the outlook so warranted substantial monetary policy easing," he'd said. Core inflation had declined as well, he'd stressed, adding that the Reserve Bank's "forecast errors have been large and systematically one-sided in overstating inflation".

Subramanian repeated his criticism when the news came that consumer price index- based inflation fell to a record low of 1.5 per cent in June.

The Survey this year has an altered structure. In previous years, there was a Part-I with a detailed overview of the economy and the outlook for coming years in the form of commentary. Part-II was mostly numbers and data. In the latest one, formally termed the one for 2016-17, partly due to advancement of the Union Budget for 2017-18, the first part was issued on January 31. This was a day before the Budget presentation.

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