 through its announcement declared that worldwide trade is predicted to fall between thirteen to thirty percent within the current year because of this fateful pandemic. It’s terribly essential to know the interaction between the pandemic and its impact on the economy because the queries of how, when, and in what means the issues which might be created by this may be resolved in an exceedingly fast spell of time. This is conjointly the time when the 

, the planet economy as an entire had gone through a sharply negative downswing in its rate. In alternative words, the worldwide economy is grinding to a halt. In an exceedingly slim sense we are able to approximate that the start of 2020 started witnessing a selected divide of the time globally, which might be roughly outlined as a 

Within the western world, the policy measures are targeting the areas to limit the collapse of 

, providing liquidity to businesses and economic transfers to individuals losing jobs. It shows that even though the matter was known, there has not been a lot of emphasis on the broken supply chains. Clearly speaking one of the most pressing problems is the downside of institutional failures which has weakened technocratic, autonomous government officials and caused general under-investment in state machinery. With domestic establishments failing, high want of basic changes, as reforms not as revolution is obligatory for the present. One of the Indian states, 

 has shown a high level of maturity within the above-named institutional setup that is far higher than the performance of some 

Looking into the developing economies of Asian countries, the main issues and impact of the pandemic on the economy concisely elucidates as even in 2008, amidst a matter of demand shock, employment was a lot less affected within the country. However, currently it involves stagnation in real sense. Moreover, this issue is additionally a reverberation of supply shock with a coincidental presence of subdued demand and production retardation. Once China shuts down it’s suppliers, the Indian prescription drugs, vehicles, and particularly portable industries will be largely affected. Alternative sectors that will be seriously affected include land, banking, agriculture and production industries. Growth and survival of many industries will be severely wedged.

In the agriculture sector, the problem is huge thanks to the essential fundamental square measures which measure the months until the crops are ready for harvestation. Apart from this, the absence of working class and transportation problems can also have serious repercussions. In banking, problems might arise mainly out of dangerous loans and existing 

 will relax the impact to some extent. Fifty two CEOs of big Indian corporations already predicted huge job losses in the forthcoming days after the COVID-19 lockdown was imposed, on top of an already high percentage (

) of unemployment before the occurrence of the pandemic.

Currently the rate is increasing once more with no management whatsoever. An economy like that of an Asian country, already plagued by high levels of illiteracy and a resistant state, can’t be very optimistic of the near future because the economic disruptions caused by the pandemic will only aggravate the existing problems. The loss of 3 million jobs points to the questionable capitalism within us.

It is vital to analyse the economic impact of COVID-19 on the present and expected rate of growth of the Indian economy to quantify the extent to which the pandemic has worsened the present scenario of 

 within the country. There is a huge necessity of this abnormal analysis in order to seek out a solution to a lot of debated political and economic policies of the government in power, and to pose political questions with a clear morality. If we tend to contemplate the same scenario from a political economy perspective, it will be a study identical to the well-known 

 impact from the overall downswing impact of the pandemic on the Indian economy.

Once the developing economies are involved, there’s a necessity for some sort of central help by international establishments, intervention for the correct allocation of resources and coordination, apart from the financial authorities of the countries. Government and policymakers started reducing the interest rates as a means to stabilize economies that were wedged. There was a time once, when the supreme institution within the country refused to tally and publish the expansion projection, making things worrisome. Whereas, credit rating agencies like 

 expected a rate of 2.5% and syndicalist 

 calculated it to 1.6%. There’s an urgent need for better coordination, better social safety and prioritising social distancing for this short period of time. Considering the Indian economy, the viability of an immediate money transfer may be possible within the short run. However, it wouldn’t be a good plan to follow in the long run. A lot of care is needed to stabilize the available chain issues. It might be conjointly a virtuous policy to initiate bailout packages for the bankrupted sectors.

What may be an honest financial policy is that the central banks ought to be able to offer overabundant liquidity to each bank and 

the worst downside of the pandemic will be the economy experiencing a

. It is an extremely significant and frightening time as there should be considerable stress on devastating problems like climate change as well, to enable the proper functioning of the economy and society as a whole.

Compared to other developing countries, it’s somewhat positive that Indian economy can be higher than alternative economies. Even the nation’s biggest import of petroleum won’t be affected negatively in the immediate future, since oil costs have been cut down to a good extent because of the external shock of reduction in demand and in fast supply chain breakages. In the midst of all these present challenges and the ones that lie ahead, hopefully the Indian economy may take off with the correct synthesis of a sturdy and resilient financial support penetrating to lower levels of the society as well.

Department of Economics, Jamia Millia Islamia

Disclaimer: The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of The Jamia Review or its members.

COVIDONOMICS: IMPACT OF COVID-19 ON THE INDIAN ECONOMY

India is land where agriculture played an important role as an active ‘primary sector’, and at present it is among the 

 and is important source of raw material for several industries.

Agriculture forms the backbone of the Indian economy and despite concerted industrialization in the last five decades; agriculture offers livelihood for about 50 per cent of the total work force. Agriculture contributes a significant proportion to the foreign exchange earnings, and hence plays a crucial role in generating foreign exchange through increased agricultural exports. At present, the agriculture sector exports account for 10 per cent of India’s total exports. A breakthrough in this sector is thus essential for placing the economy on a sound footing. Agriculture can provide a market for industrial products as increase in level of agriculture income may lead to 

expansion of market for industrial products

 also depends highly on agricultural sector. A good crop always provides impetus towards a planned economic development of the country by creating a better business climate for the transport system, manufacturing industries and internal trade etc. It is apparent that agriculture development is the basic precondition of sectoral diversification and development of the economy. According to Union Budget 2018, 

agriculture and allied sector contributes to about 17-18% percent of India’s GDP.

, MSPs were fixed at 50 per cent of costs for most crops. 

“Government has decided to keep MSP for all the unannounced crops of Kharif at least at one and half times of their production cost,”

, and went on to add that this decision will prove to be a ‘historic’ step towards doubling the income of farmers. However, a comparison of A2+FL and C2 costs with announced MSPs shows that for major winter crops like Wheat, Mustard and Chana, net return to farmers were lower than 50% when C2 costs are used, while return were significantly higher than 50% from 79% to 112% when A2+FL costs are used.

Minimum support price was first announced by the Government of India in 1966-67 for wheat at the beginning of Green Revolution.

 The main objective is to protect the farmers from depleting price because of bumper crops. 60 per cent more of C2 cost of cultivation has been the demand of farmers since a long time. The question is whether an increase in MSP will lead to the shift in terms of trade in favor of agriculture. Farmers in India are heterogeneous on the basis of land holding cultivation, i.e., 92 per cent of farmers are both small and marginal farmers having only little or no marketable surplus. 

From 2003-04 to 2013-14, despite an increase in MSP, income from many cereals and pulses has decreased. Even for paddy out of 18 major growing states, only few states are able to gain income marginally.

over 40% of farmers depends on the non-institutional credits

, i.e., rely on money lenders cum traders and input dealers. Even share of non-institutional credit is low now, rates of interest remain high. Price increase alone will not help farmers. 

Access to institutional credit system should be improved.

 Sometimes the MSP increases but farmers sell their crop to local and input dealers at a lower price than MSP due to prior agreements, as they have taken loans from them and most importantly local traders and input dealer have better transport and storage facilities that link them easily with markets.

1.5 times MSP will lead to a situation of reverse migration.

 And ultimately it will lead to a situation of overcrowding, because there will be more people to share benefits. So apart from MSP hike, there should be development of other things like livestock, non-farm business and job opportunities.

the issue of farmers’ suicide has become a cause of great concern worldwide.

 However, for India the scenario of 1997-2005 represented Indian farmers to be taking their lives every 32 minutes. One of the reasons behind these suicides is the process of boosting up crop yields that has continued to deteriorate the farmers’ condition. 

More alarming is the case of the small farmers who hardly meet their basic requirements.

 With every reduction in the crop prices, often lower than the production cost, there is a subsequent increase in the prices of inputs such as fertilizers, seeds and pesticides respectively. This shooting up of input prices induces farmers (especially the small farmers) to borrow money for transaction of seeds, fertilizers and pesticides and other necessary inputs. Between 1991-92 and 2013-14, there is marginal increase in farmers’ income while the price of urea increased by 69% and of potash and DAP (di ammonium phosphate) increased by 600% and 300%.

 intensify the economic problems faced by the farmers in India. However, there is a whole lot of other set of issues over which Indian farmers have got no control. These issues include epidemics, weather, government policy and so on. These problems are out of control of a farmer, but the 

debts are to be tackled by the farmers independently.

 A UN report has mentioned some of the perilous issues that compel farmers to take their own lives, such as 

crop failure, sudden health issues, also marriages.

 The report also asserts that the matter of suicide amongst the farmers is 

This agricultural distress epidemic aggravated the 

 especially in last year. The response of the state government has been to deal with issue on urgent basis while ignoring the structural factors for long time. Loan wavier fulfillment and others have led to the decline of agriculture investment rate i.e. 10% in real terms in 2004-05 to 2012, and now its 2.3% from 2013-14 to 2016-17. Agricultural credit also had a same story that was increasing at the rate of 21% per annum in nominal terms between 2004-05 and 2014-15 and in between 2014-15 and 2016-17 declined to 12.3%. Recent estimates of RBI shows that this has fallen down to less than 5%.

Lastly, when MSP are not fixed based on demand side factors then need of government intervention to implement MSP would be merely reduced to the situation where market are not competitive or where private traders turn exploitative and discourage them to trade. It leads to a situation where government is not able to manage huge quantity of unwanted stock.

Pachgoan in Chandrapur district of Maharashtra, there is evidence that 65 households in the village earned Rs 91 lakh during 2013-17 as wages by harvesting bamboo in the community forest. Therefore, proper arrangement should be done to guide the villagers all over the country to empower them under 

. The FRA can contribute to their livelihood and curb agrarian distress where it is possible.

Secondly, promotion and investment in livestock should be done. It will act as protection shield during the time of agrarian distress.

Thirdly, from the data of wage rate in India ( Labour Bureau), real wages of agricultural labourers have been declined at 0.3% per annum between 2013 and 2017. MSP can aggregate the agricultural income inequality in this scenario where as small and marginal farmers are solely dependent on the wages. So there is urgent 

need of providing cheap credit to small and marginal farmers to increase their profitability from crop production.

MSP should be extended to more than paddy and wheat formally and to other than surplus state. According to 

International Food Policy Research Institute (IFPRI)

‘every dollar we spend in agricultural research, there is a return of 10 dollars,’

 however, India spends only less than 0.5 per cent of its agricultural GDP on research and development (R&D), which doesn’t seem to be enough. Since, India has a large amount of population occupied in the agriculture sector; therefore there is a need for 

further investment in the area of agricultural research and development.

 Greater the promotion of R&D, the higher will be the chances of producing climate resistant crops. This will be largely helpful in improving the working of agriculture sector as well as instrumental in addressing its associated problems.

Lastly, there is also a need to spread more awareness and information amongst the farmer communities regarding the financing of agricultural credit, so that there can be a smooth flow of transaction process by the farmers. The higher is the awareness the lower will be the farmers’ distress respectively.

The recent budget has proposed to hike the MSP 1.5 times over the production cost, which is aimed at solving the issue of farmers’ suicide. However, the above study explains about a number of other diverse problems that are associated with the farmers’ distress, which has lately contributed to an increase in the number of farmers’ suicide rate.

The study concludes that only hiking MSP over the production cost is not going to suffice. There is a need for closely analyzing the intertwined nature of these diverse problems that Indian farmers are going through.

The issue of MSP hike has become a contestable topic, as there are issues within, regarding the type of cost that is to be considered. If at all C2 is taken into consideration, then only the situation of can be improved. Yet again, just hiking MSP will not solve the issue of farmers’ distress, and for which the policy makers are required to invest in other areas like, farmers education, efficient implementation of existing programmes and schemes.

, Head of Department of Economics, Jamia Millia Islmaia and

, a research scholar at the Department of Economics, Jamia Millia Islamia.

Articles by Azharuddin Ansari

COVIDONOMICS: IMPACT OF COVID-19 ON THE INDIAN ECONOMY

POLICY DIALOGUE ON “INNOVATIONS IN ENSURING REMUNERATIVE PRICES (MSP) TO FARMERS”: CHALLENGES AND STRATEGIES

COVIDONOMICS: IMPACT OF COVID-19 ON THE INDIAN ECONOMY

POLICY DIALOGUE ON “INNOVATIONS IN ENSURING REMUNERATIVE PRICES (MSP) TO FARMERS”: CHALLENGES AND STRATEGIES