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Q. Impact of demonetisation on rabi sowing regions: Discuss the impact of demonetisation on rabi sowing regions in India.
Nov 16, 2016 Related to : GS Paper-3

Ans :

Introduction-

Central government’s decision to demonetise the high value currency has affected markets, particularly for small scale retail sectors in rural and semi rural India. Similarly it has affected to farmers in rabi sowing regions. Hence there is a need to move fast to mitigate the production effects resulted due to demonetisation. Demonetisation will cause some temprory inconvenience, but it has multiple benefits in future.

Analysis- 

  • Cash crunch that resulted after the demonetisation of high value currencies of 500 and 1000 have large extent squeezed consumption and sales in all markets and also in agricultural sector. 
  • And currently prevailing situation have potential to extend to production and, if it prolonged, it may lead to economic contraction.
  • For example, rabi crop which is second largest has narrow window from sowing to harvest between late October and early March. Generally farmers fund rabi costs through cash from the sale of the earlier kharif crop.
  • But now due to demonetisation, the entire crop is at risk. Sowing is stuck around half of the total, also there is lack of cash constrains the supply of inputs, including seeds. 
  • Harvesting, a few months down the line, will be a bigger problem and sales are projected to be at high risk.
  • Similarly tractors, fuel and farm hands are generally paid for in cash,  the former might take credit, but farm workers need money immediately, money that does not exist as legal tender any more. 
  • Demand from cash-strapped buyers is likely to be muted, which might mean huge losses from wastage. It is reckoned that in value terms, fruit, vegetables, dairying and other horticulture comprise 65% of India’s farming; grains account for the rest. Hence there is risk of spoiling of these harvests.

Suggestions-

  • Government needs to take immediate steps to help farmers who are facing problems due to demonetisation.
  • There is urgent need to arrange the all required inputs required for sowing rabi crop, which are currently struck due to demonetisation. 
  • The government must make bulk cash deliveries to rabi-crop areas a priority. As rural India lacks formal banking infrastructure, so new ways like cash-dispensing vans and banking agents to distribute money must be deployed.

Conclusion-

Demonetisation, however good intended it may be, but there is no denying fact that it has caused some hardships to common people in general and farmers in particular. As farmers are facing various issues while sowing rabi crop due to cash crunch, hence it needs to be addressed immediately and effectively. Failure to act immediately would have unpleasant consequences. It is still not too late to address the issues resulted out of demonetisation scheme.

 


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