Farmers' Protests Impact Trade, Economic Activities Led By Supply Chain Disruptions

The ongoing farmers protests in North India is disrupting supply chain for days impacting transportation of goods and raw materials. Following a chain reaction, this could impact trade and halt economic activities specially in and around Delhi.

Industrial activities may be halted due to shortage of raw material such as iron and steel which are the core items for factories to operate. Specially, Delhi, a critical hub for scrap and trash materials, remains immobile led by the ongoing protests.

For the past 5-6 days, massive number of farmers' unions have been protesting while the Delhi Police has imposed Section 144 across the national capital for a month. One of the key demands is a legal guarantee of minimum support price (MSP).

While the agenda seems to be important, the usual flow of raw materials and finished goods has been halted due to these protests. According to various media reports, thousands of trucks are stuck on the Punjab- Delhi highways waiting to transport goods. Commercial vehicles with essential goods and items are allowed inside the city.

While supply chain is disrupted, it may cause logistical issues too. If the national capital is paralysed due to stalled economic activities, several industries may be affected and crores of rupees may go down the drain.

With inventory management and distribution network impacted by this, it may cause nightmares to businesses to get this cycle running. While Confederation Of All India Traders (CAIT) have requested for a smooth movement of goods, it is yet to be seen if necessary arrangements are made.

Delhi is one of the largest statistical distribution centre of India from where goods and raw materials are supplied to all over the country. Amid the continuing standoff, three Union ministers -- Arjun Munda, Piyush Goyal and Nityanand Rai -- held a third round of talks with farmer leaders in Chandigarh on Thursday evening. Reports showed that protesters and security officers clashed at least in two Punjab-Haryana border check points.

The blockade has led to the closing of shops and decreased pedestrian activity, affecting local industries and businesses with around 4,000 units, causing a decline in productivity due to a lack of workers, according to various media reports.

This whole protests is on the back of Minimum Support Price (MSP) which is a form of market intervention by the Government to insure farmers against the backdrop of any sharp fall in farm prices.

The MSP announced by the Indian Government at the start of the sowing season are for a few important crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP). The minimum support prices are an assurance price for their produce from the Government.

Farmers who are protesting near Delhi border have demanded MSP certainty across all crops, pensions for farmers, and withdrawing cases against past protesters, according to media reports.

MSP is critical for guaranteeing fair prices for agri producers and is determined by the Commission for Agricultural Costs and Prices, taking into account production costs, trends in the market, and supply-demand dynamics.