Demonetization and Indian Agriculture
Prime Minister Nagendra Modi came with scheme of demonetization of existing Rs 500 and Rs 1000 currency notes to eradicate the parallel economy and black money. This parallel economy consists the corruption, black money, illegal trading, terrorism, narcotics, and other anti-social and criminal activities. This is a very good step for the country in short term and long term. In short term, it will break down the existing chain of parallel economy immediately and in long term size of Indian economy will grow.
Indian agriculture is facing the problem of speculations and illegal trading due to black economy. From farmers to exporters every honest stack holder of Indian agriculture is facing problem of parallel economy and black money. They don’t know what will be next move in their business. In the morning prices goes up sharply and in the evening prices goes down drastically. A lot of black money has invested in trading, stocking of Agriculture commodities. These greedy traders/stockist/ exporters gives the movement to prices as per their profit.
Indian farmers and Demonetization.
Farmers is the first point of agriculture trade. He produces agricultural commodities / products with expectations of good prices but at the time of harvesting he could not able to recover his cost of cultivation. How is it possible? When farmer carry his produce in the market greedy stockist increase the parallel supply of commodity in market and farmer is forced to sell his produce at lower prices. If there will be no black money, then it will not be possible to increase the parallel supply and farmer will get the real value of his produce.
At the time of agriculture crop sowing these illegal traders / stockist increases the demand and farmers are forced to buy seed/ planting material at higher prices.
Some traders procure agriculture produce parallelly by offering the extra payment and ditching the local mandi taxes. This farm incomes remain hidden. After demonetization, parallel buying will stop and funds will be transferred to farmer’s account after paying the local mandi taxes. Transactions will be transparent. It is noticed if farmers ask for transparent transactions then these traders deduct the mandi taxes from the farmers’ payment.
Sometime traders don’t give payment on time. Some traders don’t give sale slips to farmers, it becomes very problematic for farmers to prove the source of their income to banks to get the loans. Traders purchases commodity with 30 % payment and rest of payment is made after 20-30 Days or more.
Traders purchase commodities from farmers at the time of low prices/ over supply but these traders show this buying at the time of high prices to minimize their profit or to show the losses. By the paying the 2% Mandi taxes they by pass the income taxes. The income of local agriculture market doesn’t increase and marketing infrastructure is not developed. Now these transactions will be come in accounts and farmer income will be documented and farmers can get more loan from banks. Credit worthiness of farmers will increase slowly and slowly. Farmers will easily get loan for other activities like personal loans, home loan, vehicle loans, entrepreneur loans, education loan.
Income of local agriculture market will increase and Govt can develop more market infrastructure. Farmers and agriculture activities will benefit from it. Sometime farmers produce is destroyed due to poor infrastructure specially in the rainfall, sometime buying of agriculture commodities is shown in another state and mandi income & economic opportunities moves to another state. This trend can be seen in Rajasthan at the boarder of Haryana , M.P. and Gujarat.
Agriculture Traders and Demonetization.
Honest traders face many problems due to black economy, some time they can’t get enough margin due to surrounding black economy. Local traders keep waiting for arrival. Agriculture commodities reaches to another market by passing the local economy and traders. Black money comes from another market and it destroy the business of local traders. Local employment, trading, stocking, processing, tax earning opportunities move to another location.
Black economy also lead to circular trading. In the circular trading business of local traders affects negatively. Traders are forced to buy commodities at higher prices. These circular traders withdraw draw their investments, swap the profit, and dump the commodities in market. Sometime this back money doesn’t let the prices go up even in low productions even the fix costs of commodities trading keep increasing.
After demonetization, transactions will come in account books and no one can enter with white money in this way. Investment of existing traders will be secure and their margin and profit will be secure. They can generate more income with local value addition related to grading, warehousing. processing and transportation.
Agro commodities processors
Existing agro processors faces lots of problem with black money. Sometime new processors enter in market with black money and started to work with loss or zero margin and it affects the trade of existing processors. These greedy new traders start to offer finished products at prices lower than purchase prices of agriculture commodities. Income generation cycles of existing honest processors break down and it require extra cost to start their processing or keep it running.
After a certain time, these greedy processors start adulteration and decrease quality of product and it draw negative picture of the local processors in national and international markets. Sometime complete consignment faces quality problem due to one or two containers. Sometime raw material is swap from the market with black money, supply of raw material becomes very tight and it affects the margin of processors.
These greedy processors also disturb trained human resources by offering them higher packages and more facilities for short term. Existing processors faces lots of problem with vacuum of trained employees. After demonetization, existing processors will get raw material locally and they can plan for long term sustainable profits/margins.
At this times Agro processing activities is focused in few locations in India it will increase / reach in other locations with availability of the raw material. Processors can invest in R& D in agriculture products. There will be no fear of the sudden loss in business.
Commodities exchanges
Commodity exchange were established to provide fair business activities platform to farmers, traders, and exporters but black economy promotes the Dubba Trading / Illegal commodity exchange. Dubba trading influence the physical market. Sometimes operators of these illegal exchanges create artificial situations of the oversupply and shortage to draw their profit. Prices become unstable in real exchanges investors makes a lot of losses.
Agriculture produce Exporters
Sometimes new exporters enter in market with back money and start to export of agriculture produces at lower prices than market prices to capture the market. It cut down the margins of existing honest exporters. Sometimes these types of exporters open another company in importing nation and keep exporting material at lower prices. They earn margin in importing country it forces to existing local exporters to export the commodity at no margin or loss. Buyer base of existing customers also shift to new exporters. Generally, exporters get long term orders but with these practices buyers starter to give small orders as material is available in importing country with cash and carry system.
In conclusion, there are lots of speculations and prices keep fluctuating regularly in agriculture sector. With small influence of black money complete sector is facing the problem. Demonetization will eradicate the black money and activities related to illegal trading, hoarding, adulteration will come down and complete Agriculture sector will come in profit. All the stack holders of agriculture sector will get benefit from the demonetization. It will lead to long term sustainable profitable margins.
Prime Minister Nagendra Modi came with scheme of demonetization of existing Rs 500 and Rs 1000 currency notes to eradicate the parallel economy and black money. This parallel economy consists the corruption, black money, illegal trading, terrorism, narcotics, and other anti-social and criminal activities. This is a very good step for the country in short term and long term. In short term, it will break down the existing chain of parallel economy immediately and in long term size of Indian economy will grow.
Indian agriculture is facing the problem of speculations and illegal trading due to black economy. From farmers to exporters every honest stack holder of Indian agriculture is facing problem of parallel economy and black money. They don’t know what will be next move in their business. In the morning prices goes up sharply and in the evening prices goes down drastically. A lot of black money has invested in trading, stocking of Agriculture commodities. These greedy traders/stockist/ exporters gives the movement to prices as per their profit.
Indian farmers and Demonetization.
Farmers is the first point of agriculture trade. He produces agricultural commodities / products with expectations of good prices but at the time of harvesting he could not able to recover his cost of cultivation. How is it possible? When farmer carry his produce in the market greedy stockist increase the parallel supply of commodity in market and farmer is forced to sell his produce at lower prices. If there will be no black money, then it will not be possible to increase the parallel supply and farmer will get the real value of his produce.
At the time of agriculture crop sowing these illegal traders / stockist increases the demand and farmers are forced to buy seed/ planting material at higher prices.
Some traders procure agriculture produce parallelly by offering the extra payment and ditching the local mandi taxes. This farm incomes remain hidden. After demonetization, parallel buying will stop and funds will be transferred to farmer’s account after paying the local mandi taxes. Transactions will be transparent. It is noticed if farmers ask for transparent transactions then these traders deduct the mandi taxes from the farmers’ payment.
Sometime traders don’t give payment on time. Some traders don’t give sale slips to farmers, it becomes very problematic for farmers to prove the source of their income to banks to get the loans. Traders purchases commodity with 30 % payment and rest of payment is made after 20-30 Days or more.
Traders purchase commodities from farmers at the time of low prices/ over supply but these traders show this buying at the time of high prices to minimize their profit or to show the losses. By the paying the 2% Mandi taxes they by pass the income taxes. The income of local agriculture market doesn’t increase and marketing infrastructure is not developed. Now these transactions will be come in accounts and farmer income will be documented and farmers can get more loan from banks. Credit worthiness of farmers will increase slowly and slowly. Farmers will easily get loan for other activities like personal loans, home loan, vehicle loans, entrepreneur loans, education loan.
Income of local agriculture market will increase and Govt can develop more market infrastructure. Farmers and agriculture activities will benefit from it. Sometime farmers produce is destroyed due to poor infrastructure specially in the rainfall, sometime buying of agriculture commodities is shown in another state and mandi income & economic opportunities moves to another state. This trend can be seen in Rajasthan at the boarder of Haryana , M.P. and Gujarat.
Agriculture Traders and Demonetization.
Honest traders face many problems due to black economy, some time they can’t get enough margin due to surrounding black economy. Local traders keep waiting for arrival. Agriculture commodities reaches to another market by passing the local economy and traders. Black money comes from another market and it destroy the business of local traders. Local employment, trading, stocking, processing, tax earning opportunities move to another location.
Black economy also lead to circular trading. In the circular trading business of local traders affects negatively. Traders are forced to buy commodities at higher prices. These circular traders withdraw draw their investments, swap the profit, and dump the commodities in market. Sometime this back money doesn’t let the prices go up even in low productions even the fix costs of commodities trading keep increasing.
After demonetization, transactions will come in account books and no one can enter with white money in this way. Investment of existing traders will be secure and their margin and profit will be secure. They can generate more income with local value addition related to grading, warehousing. processing and transportation.
Agro commodities processors
Existing agro processors faces lots of problem with black money. Sometime new processors enter in market with black money and started to work with loss or zero margin and it affects the trade of existing processors. These greedy new traders start to offer finished products at prices lower than purchase prices of agriculture commodities. Income generation cycles of existing honest processors break down and it require extra cost to start their processing or keep it running.
After a certain time, these greedy processors start adulteration and decrease quality of product and it draw negative picture of the local processors in national and international markets. Sometime complete consignment faces quality problem due to one or two containers. Sometime raw material is swap from the market with black money, supply of raw material becomes very tight and it affects the margin of processors.
These greedy processors also disturb trained human resources by offering them higher packages and more facilities for short term. Existing processors faces lots of problem with vacuum of trained employees. After demonetization, existing processors will get raw material locally and they can plan for long term sustainable profits/margins.
At this times Agro processing activities is focused in few locations in India it will increase / reach in other locations with availability of the raw material. Processors can invest in R& D in agriculture products. There will be no fear of the sudden loss in business.
Commodities exchanges
Commodity exchange were established to provide fair business activities platform to farmers, traders, and exporters but black economy promotes the Dubba Trading / Illegal commodity exchange. Dubba trading influence the physical market. Sometimes operators of these illegal exchanges create artificial situations of the oversupply and shortage to draw their profit. Prices become unstable in real exchanges investors makes a lot of losses.
Agriculture produce Exporters
Sometimes new exporters enter in market with back money and start to export of agriculture produces at lower prices than market prices to capture the market. It cut down the margins of existing honest exporters. Sometimes these types of exporters open another company in importing nation and keep exporting material at lower prices. They earn margin in importing country it forces to existing local exporters to export the commodity at no margin or loss. Buyer base of existing customers also shift to new exporters. Generally, exporters get long term orders but with these practices buyers starter to give small orders as material is available in importing country with cash and carry system.
In conclusion, there are lots of speculations and prices keep fluctuating regularly in agriculture sector. With small influence of black money complete sector is facing the problem. Demonetization will eradicate the black money and activities related to illegal trading, hoarding, adulteration will come down and complete Agriculture sector will come in profit. All the stack holders of agriculture sector will get benefit from the demonetization. It will lead to long term sustainable profitable margins.