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A Union budget for the village

Government must address the stress in the rural economy, seen in falling wages and incomes, which could reverse recent progress in rural areas

Written by HIMANSHU | Updated: February 27, 2016 12:30 am
union budget, budget, budget 2016, union budget 2016, 2016 union budget, 2016 budget, union budget news, rural economy, india economy, india news One of the strongest indicators of the distress in the rural economy and among the poor is the wage rate growth.

Last year in February, Prime Minister Narendra Modi had exhorted voters to vote for his party in the Delhi assembly election, claiming that his victory in the general election had brought luck to the country. Unfortunately, the voters of urban Delhi were not convinced and the BJP received a drubbing. The situation in rural India is no different, judging by the election results of the least urbanised state of Bihar some months ago.

That the economy is in crisis is no longer a matter of speculation. All indicators, except the mysterious GDP growth estimates of the Central Statistical Office, have been pointing to the worsening of the economy. Not to be left behind, even the Sensex was trading at its lowest since the government took over. The declining export figures
and falling manufacturing numbers confirm what was already known to most people tracking the economy. The worst hit in this national crisis are the poor and vulnerable in rural areas. The rural economy has been under stress. But the extent and long duration of the distress have surprised many. To be fair, a large part of this has been due to the slowdown in the global economy and the corresponding fall in prices of most primary agricultural commodities. The back-to-back droughts — only the third instance in the last hundred years — haven’t helped the situation. While luck has certainly not been on the side of the rural poor who voted overwhelmingly to bring the NDA to power in 2014, a large part of the blame must be shouldered by the government for not only ignoring the warning signs but also aggravating an already fragile situation in rural areas.

The failure of the government was evident not only in its denial of the existence of a crisis in rural areas but also the cutback in funding for most rural programmes in the last budget. The worst cutbacks were reserved for agriculture and rural areas, with reduced spending on some crucial interventions such as the Rashtriya Krishi Vikas Yojana and the winding up of the Backward Regions Grant Fund. This was accompanied by reduced expenditure on irrigation schemes, such as the Integrated Watershed Management Programme and Accelerated Irrigation Benefits and Flood Management Programme. As if these direct cuts were not enough, the sharp reduction in expenditure on other programmes and the neglect of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) meant that whatever little support rural areas were getting in terms of public expenditure also dried up. There is a massive demand for MGNREGA work but the sudden awakening of the government in the last few months
is certainly too late and too little.

The farmer was not only worried about falling output prices but also the increase in input prices and the non-availability of crucial inputs such as fertilisers. The price of diammonium phosphate had increased from Rs 10,000 per tonne in 2010 to Rs 25,000 per tonne by 2014. A similar increase has been seen in the case of the open-market urea price. This, coupled with shortages in urea and complex fertilisers, has meant that even basic inputs have been out of reach for average farmers. With the government using the opportunity of falling petroleum prices to shore up revenues by raising excise on petroleum products, even a significant reduction in diesel prices did not materialise for farmers.

The distress is now evident to anybody who has been tracking the rural economy. While this is obvious in the case of farmers, given the rise in farmer suicides across states, the worst sufferers are casual agricultural as well as non-agricultural labourers. One of the strongest indicators of the distress in the rural economy and among the poor is the wage rate growth. The latest data from the Labour Bureau suggests that the wages of unskilled casual workers have declined in real terms between November 2013 and November 2015 by 2.14 per cent per annum. This is the first time in the last five decades that the wages of casual workers in rural areas have declined in real terms. Part of the reason for this decline is the worsening of the agrarian situation. But it has also been aggravated by lack of demand from the non-agricultural sector. The last five years before 2013 had seen a sharp rise in wages in real terms, at 6 per cent per annum, driven by rising rural demand and also an increase in government spending in different forms. Rural areas have not only seen an unprecedented slump in demand — this can be gauged by the fall in two-wheeler and durables sales — but they have also been hit by the decline in employment generation through public programmes.

The extent of stress in the rural economy is not just about wages and incomes. It is about making the rural economy an engine of growth — and also making growth inclusive. Falling incomes are not only going to hurt the economy in the short run. They will also likely reverse the process of development in rural areas that had been seen
in terms of rising access to education, particularly among women, and nutrition. Unfortunately, there has been no recognition of the extent of distress in the rural economy, let alone concrete measures to correct it. While an increase in financial spending will certainly be required to revive sagging rural demand, the situation also requires political commitment to make growth inclusive. It may not be too late to do so, but the government should keep in mind that luck favours the brave. For this government, the time to take brave decisions is now.

The writer is associate professor, Centre for Economic Studies and Planning, JNU, Delhi

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    1. M
      Feb 28, 2016 at 2:26 am
      Try it. write pappu in any comment with Rahul hi in brackets. The comment will straight away goes to the moderator.
      1. A
        Amit Arora
        Feb 27, 2016 at 9:53 am
        Articulation at its utterly fueled best! The author is talking on his knowledge of spectated reports, newspaper columns and versions of those who rarely visit villages on selective basis rather than om basis. For any economy engine to be ignited in our country, there has to be a state propellant in isting the schemes from the Central. The states should help the people to understand the measures and schemes mobilized for them. But, unfortunately nothing is in corridors at least for stigma haunted states like West Bengal, Bihar, Uttar Pradesh and to some extent Andhra Pradesh. Have you got a chance to visit the rural areas of different states in past few months. Now, let me take you to a virtual mapping of the same. To start, West Bengal's state government receives funds for Swachh Bharat Abhiyan, uses it for allocation in an impeccable way, but at the end the people in the village gets their toilet build with the name 'Nirmal Bangla'. Nirmal Bangla is West Bengal's state run sanitation program which has remarkably done well as far as implementation is concerned, but the Centre's most pragmatic scheme to start inclusive development miss its noteworthy credit because of state's interest of materializing its own voter interests. How can we even talk about a rural economy, when the people do not have access to even basic necessities like electricity, toilets and water ? The Central Government is trying its level best to achieve electrification and sanitation for households irrespective of topography, custom and potion strata. The results in rural electrification, toilets construction and roads connectivity are perfect examples for this. Dear author, you are talking about an economy, not about an automobile where the impact will be seen in seconds. Enabling rural households to be fit and healthy for living an equitable, just and sustainable life is the prime face of any development intervention. In states like Bihar, Uttar Pradesh and Maharashtra, did you observe consecutive monsoon failures which has resulted in a vicious circle of debts for farmers. To add to their misery, the uneven rains during the time of harvesting wheat made the conditions worst for them. The new crop insurance scheme will definitely be a boon for the farmers, but again the states working for implementation puts a question mark on the impact of the schemes! The states have shown a negative approach to implement Central run projects owing to personal conflicts, improper state machinery and tormented governance structure. You go in Darbhanga district of Bihar, visit any village, and ask them where are your toilets which have to be constructed under Swachh Bharat Abhiyan. The people will tell you about their unending visits to Block Development Officer (BDO) office for getting their subsidies, no information about the schemes and zero tolerance of government officials to listen to their problems. And to explain you better, why rural economy is in distress, I will mention an example to make you see the world outside of your reports and journals. A poor farmer with a land holding of 0.5 acre in Bihar, fix the marriage of his daughter in September month of 2014, and the marriage is scheduled to be held in March 2015. He relies on his small cropping pattern on which he has cultivated wheat to meet the operational expenses of his daughter's marriage next year. In the same quest, he constructed toilet in his home spending Rs 12. 000 from his savings because he was promised he will be paid back the amount spend till a capping of Rs 14, 000 by the local village head or by the BDO under Swachh Bharat Abhiyan. Unfortunately, the hailstorm in February spoiled his crops and he is left with 40 per cent of his produce only. His problems escalated due to minimum cooperation for his subsidy from BDO and he miss out at his spending of Rs 12, 000. Now, as he do not have enough money, he has to optimize his resources. But, you cannot go well with empty hands in your daughter's marriage. So in order to handle the marriage and his framed dignity, the farmer borrows from money lenders on high interest, and negotiates with local retailers of clothes, sweets and ornaments to give him the goods and supply on half credit. This results in less money flow in rural economy as the cloth merchant, sweet shop owner and the jeweler all have half credit in their accrual accounts and the farmer thus gets into a circle of repayments for his next 5-6 years which haunts his savings and investments both. When you mention, economy and entrepreneurship for tackling farmers problems, I will cite my own experience with one of the BIMARU states government. I wished to start an all women unit for vermin compost production unit on medium scale to target the problems of soil productivity, degradation by Urea and water consumption by farmers in rural belts of Uttar Pradesh. With all the criteria satisfied and the permissions from the Central for the grant, I am still unable to do so after two years owing to state government's officers inability to understand my intervention for rural people! One more pointer, try to write to a Central Ministry Department regarding any issue and you get the reply in a week, and write the same mail to state departments and you spend a lifetime for their mail! This is how a village economy comes in stress! No employment, bad shaped entrepreneurship, discussions only in forums and invisible implementation!
        1. H
          Feb 27, 2016 at 6:41 pm
          Looks like soon you bhakts will term any criticism of a policy or a failure of the govt anti-national. Perhaps already the Delhi police believe so ...?
          1. J
            Feb 28, 2016 at 4:13 pm
            Despite these problems,some states have done well.Question is central efforts which have slowed down.
            1. J
              Feb 28, 2016 at 4:14 pm
              Trolls are paid to write praises of Modi.Why do you expect them to apply their brains?
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