KOCHI:The recent hike in minimum support prices (MSP) for agriculture commodities, including paddy, by the Centre is likely to trigger food inflation in Kerala, which relies on other states for most of its food needs, said experts.
Kerala, being a major importer of food and agricultural commodities and with nearly 63 per cent of the total cropped area devoted to cash crops, the hike will also only have a marginal effect on its farmers. Early this month, the Centre announced a hike in MSP for paddy – the main crop planted by farmers in the rain-fed Kharif season – to `1,760 per quintal for the 2018-19 crop season. This is an increase of `200 per quintal, or a 13 per cent hike over last year’s MSP, and the steepest hike since 2012-13.
Rice is the third largest area under crop cover (6.6 per cent) in Kerala after coconut (30 per cent) and rubber (21.3 per cent). Among other crops, where MSP has been hiked are soyabean, groundnut, moong and cotton between 10 per cent and 28 per cent year-on-year, but none of them are cultivated in the state.
“The MSP hike will trigger food inflation in Kerala, which is a consumer state. Further, there has also been a decline in wage growth in Kerala,” Nimmish Sany, a research assistant at the Centre for Public Policy and Research (CPPR), told Express.
He said in all the previous MSP hikes, the data shows a direct correlation between food inflation and such hike in support prices.V K Vijayakumar, chief investment strategist at Geojit Financial Services, while admitting the hike will lead to food inflation, said the overall inflation in the country has been brought down from ‘double-digit’ figures to about 4.5-4.2 per cent in the past four years.
“The share of agriculture is only about 10 per cent of the state’s GSDP, shows the MSP hike will have an impact on food inflation. However, I feel it will only be a marginal effect. It is not a matter of serious concern,” he said.