Munich Personal RePEc Archive

Implications of Economic and Financial Crisis for Agricultural Sector of India

Deepak, Shah (2012): Implications of Economic and Financial Crisis for Agricultural Sector of India.

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Abstract

Although the global economic downturn has resulted in large-scale job losses and mass unemployment in many export-oriented sectors, the situation in food and agricultural sector has remained stable with little job losses. However, since agricultural sector in India has somewhat different entity, the impact of global crisis in this sector is seen to have percolated in varied forms. During the period of slowdown when there stood virtual ban on foodgrain exports, the raw sugar was subjected to zero import tariff, leading to widespread protest by the sugar industry. The “free” imports of raw sugar raised concerns regarding cultivation of sugarcane in the country. Adequate control obviously needs to be exercised on the domestic prices of all essential commodities of common consumption, including sugar. Interestingly, despite decline in income elasticity of demand for cereals in India, the low-income groups still show positive income elasticity of demand for cereals, indicating little tendency of decline in demand for cereals even if income falls marginally. This not only ensures higher demand for farm produce but also significantly high demand for labour in agriculture. However, the global economic recession has certainly compounded the problems of cash crop growers as the farmers producing cash crops saw lower prices on offer for their produce despite rise in food prices. Further, though prices of edible oil in India declined due to crash in world prices of oilseeds, the price of non-food primary products hardly changed. Nonetheless, the major cause of concern for the food sector of India is the 10 per cent rise in wholesale prices of cereals between December 2007 and December 2008 period as this has resulted in reduction in real income of all urban and rural household. Although government has resorted to initiate some measures to check prices, there still stand various other measures to be initiated to safeguard Indian economy from global economic slowdown.

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