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Current account deficit, looming global food shortage

  • Published
    19th Oct, 2022
Context

Details:

  • The Cabinet Committee on Economic Affairs approved the increase in MSP for all mandated Rabi crops for the marketing season 2023-24.
  • The highest increase, of Rs 500 per quintal, was provided for lentils (Masur), followed by a Rs 400 per quintal increase for rapeseed and mustard.

Why have the MSP prices been increased?

  • India’s import dependence is primarily on two crops:
  • Lentils (Pulses)
  • Oilseeds (Edible Oils)
  • India's Current Account Deficit is ballooning and that is hurting our currency.
  • The decision to hike the MSP, especially for lentils and oilseeds such as rapeseed and mustard, is an attempt by the government to encourage domestic production and thereby reduce their imports.


India’s Current Account Deficit (CAD):

  • India’s CAD, the quantum by which imports exceed exports grew to $23.9 billion in the April-June 2022 quarter.
  • It is the highest in at least three years.
  • Some estimates project the CAD to grow even further to $40 billion in the July-September 2022 quarter.

The incentive to increase production: MSP

  • Incentivize Farmers: To avoid any impact of the pandemic and the Ukraine crisis on the Indian economy, the government is inclined to incentivize to maintain or increase production in the selected crops.
  • Minimum income to farmers: The MSP serves the purpose of not only providing a minimum income to the farmers but also helping the government procure these crops for its own reserves.
  • By doing so, the government is looking at providing farmers with remunerative rates in relation to the cost of production.

Cropping Seasons in India:

S. No               

Cropping Season               

Time Period      

Crops   

States

1.        

Rabi      

Sown: October-December

Harvested: April-June

Wheat, barley, peas, gram, mustard, etc.    

Punjab, Haryana, Himachal Pradesh, Jammu and Kashmir, Uttarakhand, and Uttar Pradesh

2.        

Kharif   

Sown: June-July

Harvested: September-October

Rice, maize, jowar, bajra, tur, moong, urad, cotton, jute, groundnut, soybean, etc.    

Assam, West Bengal, coastal regions of Odisha, Andhra Pradesh, Telangana, Tamil Nadu, Kerala, and Maharashtra

3.        

Zaid

Sown and harvested: March-July

(between Rabi and Kharif)

Seasonal fruits, vegetables, fodder crops, etc.               

Most of the northern and northwestern states

 

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