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Falling farm income reverberates across wider economy

30 24
02.12.2024

One of the key reasons for macroeconomic stability is the decline in commodity prices, driven by both global and domestic factors. However, this trend is taking a toll on the agricultural sector. Farmers are earning less, which in turn reduces their capacity to invest in future crops. This decline in farm income is also dampening demand for agriculture-related inputs, construction materials, clothing, automobiles, and other goods. The ripple effects are far-reaching, suppressing overall economic demand.

In the last season, the government chose not to procure wheat at the support price. While this decision could lead to long-term benefits by allowing market dynamics to dictate prices and planting decisions, its execution was perceived as unfair by the rural community. Farmers operated under the assumption that the government would purchase their stock at an indicative support price. Based on this expectation, they made planting decisions. However, the government later allowed the private sector to import wheat and refrained from buying from the domestic market, leading to a collapse in wheat prices. Even today, wheat flour prices remain one-third lower than their peak levels at the beginning of 2024. While this has contributed to lower inflation, a point the government........

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