Effect of Hike in Fertiliser Prices and Railway Tariff on the Economy - A Comment

An attempt is made to capture the direct and indirect effects of decreasing the fertilizer subsidies and increase in the railway freight charges on the general price level in an input output framework. The results show that their effect is marginal on the food grain prices and also on the wholesale price index. In order to compensate the farmer for a 30 per cent decrease in fertilizer subsidy, the procurement prices of rice and wheat have to be raised by Rs.3.95 and 4.34 per quintal respectively. Similarly, for cash crops Like groundnut and cotton (hybrid) the procurement price has to be increased by Rs. 10 .67 and Rs .13 .80 per quintal respectively.