Policymakers in the corridors of power in Delhi are feeling upbeat. There is recovery and resurgence in India’s stockmarkets. The Make in India campaign is getting more publicity and being noticed by foreign investors. FDI inflows are improving, and India’s ranking in the Ease of Doing Business index seems to be improving, as per some selective ratings.
But agriculture, where almost half of India’s workforce is engaged, continues to be in the doldrums. And no one seems to be perturbed about it. That’s pathetic and tragic.
Between 2004 and 2011, domestic agricultural prices rose in line with global prices, which incentivised farmers to invest in agriculture. This, in turn, resulted in higher growth in agriculture, higher wages for farm labour, and the fastest decline in poverty since the initiation of reforms in 1991. The decline in poverty during this period was almost three times faster than during the 1993-2004 period. But the dream run seems to be over.
Since 2012-13, agriculture is limping, partly due to droughts and partly due to the collapse in commodity prices.
Government officials vie with the RBI in taking all the credit for taming inflation, especially food inflation. If their policy instruments are so powerful, how is it that they are helpless to control the prices of onions and pulses, which have gone up by more than 50 per cent in a single year? Our analysis shows that almost two-thirds of the decline in food inflation has resulted from the fall in global prices. This is leading to a decline in agri-exports, rising imports and falling food inflation at home. This is a result of sheer good luck for the Narendra Modi-led government — not a policy success.
But there is some bad luck too — in the form of back-to-back droughts. Monsoon rains (June 1 to September 30) in 2014 were less by 12 per cent compared to the long period average. That led to a drought, and agri-GDP growth collapsed to 1.1 per cent. This year’s rain deficit is bigger at 14 per cent, and water storage in 91 reservoirs is also lower than last year. Unless a miracle happens, or statistics are cooked, all reports from the ground suggest that growth is going to be even lower. That would mean that, against a target of 4 per cent, the average growth of agriculture during the first four years of the 12th Five Year Plan is going to be only around 1.5 per cent. That’s a massive failure in a sector that engages the largest number of people, especially those at the bottom of economic pyramid.
So the big political question that needs to be addressed is: What is the role of public policy? I will not recommend sacrificing growth to attain equality, but the nature of growth must be tweaked to get at least 4 per cent growth in agriculture.
Farmers are losing patience with each passing day. Punjab farmers are already up in arms, blocking trains because their cotton crop is heavily damaged and basmati prices have collapsed by more than 50 per cent. Soon farmers from Maharashtra, the interiors of north Karnataka and Uttar Pradesh are likely to rise up in protest. Can the Centre hear the rumblings? It is a wake-up call. Only the deaf can ignore it.
On August 15, the prime minister announced a change in nomenclature, adding “farmers welfare” to the name of the department of agriculture and cooperation. But, so far, there is no sign of any welfare measure for the farmers. We have only heard of the OROP for jawans, but kisans have been left to fend for themselves. What can the PM do to improve the economic situation of those engaged in farming so that their poverty can be eliminated in the next 10-15 years? A number of things can be done to achieve this.
First and foremost, we need a true champion of agriculture in the Union cabinet — someone who has a clear vision and the commitment and passion to tap the full potential of Indian agriculture in a global setting. Second, it is about time the Centre declared a drought in the worst-hit states, like Maharashtra, Karnataka, Madhya Pradesh, Gujarat, Uttar Pradesh, Bihar, Haryana and even Punjab. The Centre should ask the states to assess the damages in the next two weeks. Further, the assessments being made today are more political than scientific. That needs to change. And based on the degree of damage, the Centre should frontload the compensation package. Crop insurance needs to be resurrected. And farmers should be mainstreamed so that they avail of life insurance schemes, the Atal pension scheme, etc. Among other things, loans can be restructured and interest rates waived off. These measures will reveal the PM’s concern and compassion for the farming community.
It would be good economics, as well as good politics.
The writer is Infosys chair professor for agriculture at Icrier