Farmers’ agitations are spreading across many states. It is the culmination of the acute distress in the farm sector that many observers have written and spoken about in the last two years. Two years of drought in many states was the main cause. The governments cannot be blamed for the occurrence of drought, but governments are solely responsible for the mismanagement of the consequences of drought. Apart from the natural calamity of drought, there were man-made calamities, and this column is about how the two have brought about the explosive situation in the country.
The bulk of farmers in India have no choice but to do farming. Land is the only asset they have, farming is the only skill they possess, and unless they grow food many of them will face starvation. Agriculture, despite its declining share in total output (GDP), is also the largest employer. In India’s economy, the agriculture sector has primacy.
The Price of Neglect
Unfortunately, the NDA government lost sight of this basic truth. The agriculture portfolio is the Cinderella of this government. The Minister of Agriculture, unchanged since May 2014, is a political lightweight with little clout within the government. (How many of you can name Mr Sharad Pawar’s successor?). The minister has been neither seen nor heard by most people. The only memorable statement on agriculture that I can recall was when he repeated the Prime Minister’s promise to “double farmers’ income in 6 years” and when asked if they had meant ‘real’ income or ‘nominal’ income, there was deafening silence.
On the other hand, the government erred grievously on the issue of minimum support prices (MSP). In its manifesto and in the election campaign, the BJP had unequivocally promised that it would implement the M S Swaminathan Committee’s recommendation that MSP should be cost plus 50 per cent. In government, the BJP not only reneged on its promise, it dealt a body blow to farmers by denying them even a reasonable increase in MSP in its first three years. The numbers speak for themselves:
The ostensible reason for denying a fair MSP was that higher MSP fueled inflation, which is partly true, but to lean in favour of inflation control against the interest of India’s farmer-producers was the height of folly. Some inflation is inevitable, and the government and the RBI must use other instruments to moderate inflation rather than reduce the farming community to penury.
The second grave error was demonetisation. Mr Harish Damodaran has convincingly demonstrated how demonetisation has crippled the post-harvest agricultural economy (see The Crops of Wrath, Indian Express, June 12, 2017). Agricultural products are bought and sold largely in cash. Demonetisation dried up liquidity and prices have crashed. According to Mr Damodaran, never before have prices of tomato, potato and onion crashed at the same time. Same is the situation with soyabean, arhar, garlic, methi (fenugreek) and grapes. Saying that farmers have resorted to ‘fire sales’, Mr Damodaran’s conclusion is, “We have entered deflation territory in farm produce, whose proximate trigger clearly has been demonetisation.”
The third error was when the Prime Minister announced, on behalf of the yet-to-be-elected Uttar Pradesh government, that all farm loans in UP will be waived if the BJP formed the government. More likely, it was just an election promise in a state that the BJP perhaps did not expect to win, but it was an unequivocal promise that has returned to haunt the BJP in several states. Farm loan waivers are neither intrinsically ‘good’ nor ‘bad’. As Dr M S Swaminathan said a few days ago, “Loan waivers, though temporarily necessary, do not provide for a secure long term credit system” (emphasis supplied). When farmers do not get a fair and reasonable price and are unable to repay their loans, they demand a loan waiver. The holder of the highest political office promised a total loan waiver, why blame the farmers for demanding that the promise be implemented?
In February 2008, the fiscal situation was excellent, growth had found a new momentum, and a one-time loan forgiveness to small and medium farmers was justified. The central government was confident it could fund the waiver and so it went ahead and announced it. In 2017, however, every prudent norm was turned on its head. The Prime Minister promised a loan waiver on behalf of an yet-to-be-elected state government, no one seems to have examined the capacity of UP to bear the burden, and no one seems to have factored the fallout in other states. Having mounted a tiger, the BJP does not know how to dismount it. Meanwhile, the tiger is galloping through Madhya Pradesh, Chhattisgarh, Punjab, Haryana, Maharashtra and Gujarat.
Jobless youth angry
The last straw was jobless growth. Young men can find no work on farms or off farms. Micro, small and medium businesses are not offering new jobs. Tier 2, 3 and 4 towns are full of jobless youth and their anger has turned against the central government. The BJP will not admit its mistakes. Nor will any BJP leader tell the Prime Minister that mistakes were made. Will the Prime Minister pull a rabbit out of the hat? Wait and see.
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