Ans1:
Terms of trade, specifically, the terms of trade between agriculture and industry is the ratio of agricultural prices to industrial prices, both measured as price indices.
the terms of trade between agricultural and industry lies at the heart of the government's policy in the agricultural sector. while the government turned the terms of trade against agriculture earlier, it moved it in favour of the sector in the nineties. this, in effect, has transferred incomes to farmers.
Benefit to farmers
1. Increased purchasing power: a rise in the ratio (agricultural prices divided by industrial prices) means that the agricultural sector is better off in terms of its purchasing power of industrial goods. Ex: there are just two goods in the economy, bananas and pins and you produce and sell bananas. both initially cost rs 10. if banana prices go up by 100 per cent and the price of pins doesn't, then as a banana manufacturer you are better off since one banana can now buy two pins instead of one.
2. Preventing migration to non-farm sectors
3. Increased disposable income would lead to better investment by the farmers in health, education, land improvement etc.
Trends :
ToT for farmers and the agriculture sector rose significantly during the period 2004–05 to 2013–14, though they stagnated after 2010–11. The ToT for agriculture rose much faster than for farmers.
However raising MSPs has its own set of problems and donot uniformly benefit all farmers and this feeds into the fiscal deficit and creates problems of macroeconomics management.
if indeed, the policy is to increase the purchasing power of farmers further, the right tack would be to cut industrial prices rather than jack up agricultural prices. the way to do this would be to cut the import tariffs on industrial products, increase competition and allow industrial prices to fall
Ans2:
ToT is basically the measure of input over output of some specific sector. ToT of various sectors are compared to measure the relative profitability among them. In agriculture ToT is used to fix the price of products in market i.e. MSP.
Usefulness of ToT:
India is an agriculture based economy and to provide right price to farmer for their product the ToT is fixed by Govt. As FCI(Food corporation of India) is a major buyer in agriculture, the Govt fix MSP(Minimum support Price) based on factors like ToT to buy product from farmer. The major role of ToT & MSP is to save farmer from vagaries of market& weather.
Trends of ToT:
Based on Kahlon committee recommendations the labour factor is included in ToT which lead to considerable increase of MSP. Global commodity prices also affected ToT i.e. till 2010 the ToT increased dude to increase in global prices and have seen fall after that.
Rightful implementation of ToT in fixing MSP lead to the balanced growth of economy, such decisions should not be influenced by politics. Steps like financial services, market linkage, storage facility, technology & agricultural extension services will set in the next stage of agriculture sector modernization.
Ans3:
Terms of Trade (ToT) is the ratio between the indices of prices received and index of prices paid for final consumption, intermediate consumption, and capital formation. Developed in 1995, the indices of ToT covers agricultural items sold like grain crops, pulses, oilseeds, commercial crops, livestock and dairy products, forest products and also labour services sold by agriculture to non-agriculture. The triennium ending 2011–12 has been chosen as the new base for the calculation of ToT.
The ToT for farmers and the agriculture sector rose significantly during the period 2004–05 to 2013–14, though they stagnated after 2010–11. The ToT for agriculture rose much faster than for farmers. The reasons for the rise in ToT include increases in MSP, higher growth in wage earnings in the MGNREGS wages and higher growth in construction and other non-farm sectors could have caused this growth.
Higher ToT along with increases in productivity is important for raising incomes of farmers and the agricultural sector. At the same time, profitability in farming does not depend only on making relative prices favourable by improvements in ToT. Improvements in agricultural productivity through INVESTMENTS in irrigation, research and other important infrastructure are also crucial for the farming sector to gain higher returns. There has to be a balance between both price and non-price interventions so that all sections of the society, viz, agricultural producers, consumers are benefited. However, agricultural price policy has to play a crucial role in augmenting non-price support measures through ToT to spur investments, technology adoption, growth in agriculture, and ultimately to improve profitability and incomes of the farming community.
Terms of trade, specifically, the terms of trade between agriculture and industry is the ratio of agricultural prices to industrial prices, both measured as price indices.
the terms of trade between agricultural and industry lies at the heart of the government's policy in the agricultural sector. while the government turned the terms of trade against agriculture earlier, it moved it in favour of the sector in the nineties. this, in effect, has transferred incomes to farmers.
Benefit to farmers
1. Increased purchasing power: a rise in the ratio (agricultural prices divided by industrial prices) means that the agricultural sector is better off in terms of its purchasing power of industrial goods. Ex: there are just two goods in the economy, bananas and pins and you produce and sell bananas. both initially cost rs 10. if banana prices go up by 100 per cent and the price of pins doesn't, then as a banana manufacturer you are better off since one banana can now buy two pins instead of one.
2. Preventing migration to non-farm sectors
3. Increased disposable income would lead to better investment by the farmers in health, education, land improvement etc.
Trends :
ToT for farmers and the agriculture sector rose significantly during the period 2004–05 to 2013–14, though they stagnated after 2010–11. The ToT for agriculture rose much faster than for farmers.
However raising MSPs has its own set of problems and donot uniformly benefit all farmers and this feeds into the fiscal deficit and creates problems of macroeconomics management.
if indeed, the policy is to increase the purchasing power of farmers further, the right tack would be to cut industrial prices rather than jack up agricultural prices. the way to do this would be to cut the import tariffs on industrial products, increase competition and allow industrial prices to fall
Ans2:
ToT is basically the measure of input over output of some specific sector. ToT of various sectors are compared to measure the relative profitability among them. In agriculture ToT is used to fix the price of products in market i.e. MSP.
Usefulness of ToT:
India is an agriculture based economy and to provide right price to farmer for their product the ToT is fixed by Govt. As FCI(Food corporation of India) is a major buyer in agriculture, the Govt fix MSP(Minimum support Price) based on factors like ToT to buy product from farmer. The major role of ToT & MSP is to save farmer from vagaries of market& weather.
Trends of ToT:
Based on Kahlon committee recommendations the labour factor is included in ToT which lead to considerable increase of MSP. Global commodity prices also affected ToT i.e. till 2010 the ToT increased dude to increase in global prices and have seen fall after that.
Rightful implementation of ToT in fixing MSP lead to the balanced growth of economy, such decisions should not be influenced by politics. Steps like financial services, market linkage, storage facility, technology & agricultural extension services will set in the next stage of agriculture sector modernization.
Ans3:
Terms of Trade (ToT) is the ratio between the indices of prices received and index of prices paid for final consumption, intermediate consumption, and capital formation. Developed in 1995, the indices of ToT covers agricultural items sold like grain crops, pulses, oilseeds, commercial crops, livestock and dairy products, forest products and also labour services sold by agriculture to non-agriculture. The triennium ending 2011–12 has been chosen as the new base for the calculation of ToT.
The ToT for farmers and the agriculture sector rose significantly during the period 2004–05 to 2013–14, though they stagnated after 2010–11. The ToT for agriculture rose much faster than for farmers. The reasons for the rise in ToT include increases in MSP, higher growth in wage earnings in the MGNREGS wages and higher growth in construction and other non-farm sectors could have caused this growth.
Higher ToT along with increases in productivity is important for raising incomes of farmers and the agricultural sector. At the same time, profitability in farming does not depend only on making relative prices favourable by improvements in ToT. Improvements in agricultural productivity through INVESTMENTS in irrigation, research and other important infrastructure are also crucial for the farming sector to gain higher returns. There has to be a balance between both price and non-price interventions so that all sections of the society, viz, agricultural producers, consumers are benefited. However, agricultural price policy has to play a crucial role in augmenting non-price support measures through ToT to spur investments, technology adoption, growth in agriculture, and ultimately to improve profitability and incomes of the farming community.
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