There Is No Quick Fix To Indian Agrarian Crisis

st February has offered a measly annual amount of Rs6,000 to 120m farmers with cultivable land of up to 2 hectares. The amount to be transferred directly to bank accounts of beneficiaries in three instalments will cost the exchequer Rs75,000 crore a year. Expectedly Gandhi has found the grant of “Rs17 a day an insult to our farmers.” Orissa chief minister Naveen Patnaik who would not give anything more than 2.5 out of ten to the interim budget was disappointed that the centre should have at least matched what his KALIA scheme was to do for the state farmers. As if all this was not enough, Yogendra Yadav, national president of Swaraj India, finds the PM Kisan Samman Nidhi “far from being a samman (respect) is an apaman (disrespect) for farmers. Frankly, it would have been alright if the government had made no declaration at all” in this regard. There is no quick fix to the Indian agrarian crisis. From the shrinking size of agrarian land holdings – the average size is down from 2.3 hectares in 1970-71 to 1.08 hectares in 2015-16 and it is likely to be even smaller now – to low productivity to unremunerative prices season in and season out with sector debts piling up all the time, small and marginal farmers are exposed to growing privation. From time to time, governments controlled by political parties of different hues at the federal level and in the states have responded to the crisis by periodic waiver of farm loans and granting of financial support. Many have argued that loan waiver done as part of redemption of promise made ahead of elections is completely wrong. But Professor Sen has a different take on it. He says: “Loan forgiveness is not as silly a policy as you might think. Those who have got into debt have a set of problems and it may be their fault in some way.” But he also argues that most farmers have done nothing to deserve that indebtedness. Given their pretty small income from their pretty small land holdings they are doomed into that difficult situation. The popular perception is that loan waivers are pro poor farmer in nature. The regressive kind of the waiver scheme comes to light when it is seen that not even 15 per cent of poor farmers take loans from official sources. What is more, on average, borrowings of rich farmers are four times as much as poorer ones. The agrarian crisis resulting from a combination of factors needs to be seriously addressed. Let’s consider the farm input water, which in many parts of the country, including Maharashtra and Karnataka remains in short supply. Despite this, India continues to indulge in the luxury of using up to three times the water used to produce grains than in countries such as the US, Brazil and China. New Delhi and also state governments have a major role to play in bringing about improvements in water-use efficiency and preservation of surplus water during the monsoon. More than 60 per cent of irrigation water here is used by rice and sugar cane. Should we then commit around 5.4 million hectares to growing sugar cane when year after year because of surplus production and, therefore, low sugar prices, crushing factories are not able to settle cane bills of farmers in time? Curing the farm sector of its many ills will require of New Delhi to take actions based on thorough studies and not knee-jerk steps of which the country has seen many in recent years and involving the state governments. What we have mostly noticed so far in the absence of concerted moves to make the farm sector vibrant, the authorities are providing cash assistance to give some relief to farmers. In the meantime, Arvind Subramanian, former economic adviser to Indian government and three other economists have presented a programme called a quasi-universal basic rural income (QUBRI) under which there will be a direct cash transfer to rural households. The crisis is agrarian but the rural economy is depressed. This justifies the broader focus of QUBRI. The programme will have rural universality that will only exclude “the demonstrably well off based on the rural Scocio-economic Caste Census.”]]>

Budget 2018 targets the Real India

LokMarg’s quick take on Budget 2018

Many have quickly labelled Finance Minister Arun Jaitley’s Budget 2018 as being “pro-rural”, “pro-farmer”, or one that is “election-ready”, given that Parliamentary polls loom large on the horizon. Perhaps Budget 2018 is all of those. But the problem is that most budget analyses and experts’ views that we get in the mass media, particularly on news TV channels, are perspectives that are innately urban. Consider first the fact that 7 out of 10 Indians live in rural areas. Now consider that of the estimated 474 million Indians that are gainfully employed, only 100 million have manufacturing jobs; and 142 million are employed in services businesses. That leaves 232 million people. Where do you think they work? On farms in India’s villages. These working Indians who make up nearly half of the country’s employed citizens try to eke a living out of agriculture. And, if you take India’s population in totality, including those among the 1.3 billion who don’t work, more than 70% live in rural India and also depend on farms to make a living.

There’s a third fact to consider: while 69% of India’s GDP comes from services, and 17% from manufacturing, agriculture, which employs the largest number of people, contributes just 14%, a proportion that is declining every year. There are other factors too to consider. Agricultural productivity has been declining in India; and even as global farm produce prices have been increasing, Indian farmers are unable to get good market prices for their output domestically and are restricted from exporting their produce. More than 90% of India’s farmers are small or marginal and burdened by loans that come with usurious rates of interest. This, in short, is the farm distress that India faces today.

Mr. Jaitley’s Budget strongly focuses on rural India. If you’ve followed the drift provided by the numbers above, it is actually the real India. Budget 2018 aims to enable India’s rural citizens, especially those that are under-privileged and impoverished, to go to markets more efficiently; benefit from infrastructure and credit; and have access to roads, power, toilets, and free cooking gas. And while “pro-farmer” and “pro-rural” are catchwords guaranteed to work as hooks for an urban audience, the more apt label for Budget 2018 would be “pro-Real India”.

Of course, the Budget also eyes the polls that are in the offing. Officially those elections are scheduled for the summer of 2019, but there is also speculation that they might be advanced quite aggressively and be held within 2018. If 70% of Indians live in rural areas, there are no prizes for guessing where the bulk of votes during those polls will come from. But strip off the cynicism of politics and focus on the reality of economics. If Budget 2018’s proposals indeed bear fruit and life for the majority of Indians who live in its 640,867 villages improves, it will also spur the economy to grow faster. As India’s poor are able to get better incomes, they’ll spend more, triggering growth for manufacturing and services sectors.

For far too long, Indian agriculture—the mainstay of most Indians—has been given the short shrift. Budget 2018 is a step in the right direction that could help correct that aberration.

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