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HomeWorldWhy Farmers Got a Breather from India’s Cash Crunch

Why Farmers Got a Breather from India’s Cash Crunch

Farmers in India are enjoying a privilege denied to the rest of their countrymen–permission to use old 500-rupee currency notes to buy seed.

Prime Minister Narendra Modi earlier this month announced the replacement of high-denomination bank notes worth 500 rupees ($7.33) and 1,000 rupees ($14.66), to get rid of corruption, eliminate counterfeit money and make people pay taxes.

The move has led to a cash shortage, with long queues outside banks and ATMs as people wait to get new money, exchange old notes, or deposit cash in their accounts.

India’s peak agrarian period is now, when farmers pick summer crops such as rice, lentils, cotton and sugar cane and start to sow winter crops for the season that begins in November and lasts for about three months.

Many farmers keep cash at home and are without bank accounts and had found themselves without the legal tender needed to buy seeds and fertilizers. That raised concerns of delays in planting that would hurt production of food and other commodities, denting the livelihood of rural communities as they try to recover from two successive years of poor monsoon rainfall.

Cash-strapped farmers are now allowed to purchase seeds from central or state government outlets, national or state seed companies and agricultural universities using the out-of-date notes, the Ministry of Finance said Monday in news release.

“The rule has been revised to make sure the planting season is not lost,” an official at the Ministry of Agriculture, who asked not to be named, said. “Seeds for the new winter crop can be planted only during a short period. That period is overlapping with the demonetization program,” he added.

The cash crunch has already caused disruptions in the food supply chain with some farmers throwing crops out due to weak sales. Farmers and poor people living in rural Indian villages will need time to make their way to neighboring cities to swap their notes.

“Those who have already invested money in cultivating new crops and water facilities cannot afford to leave their farms unattended,” the agriculture ministry official said. “A delay in sowing poses a risk to yields,” he added.

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(via WSJ)