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From Plate to Plough: On the farm front, make a bold move

The budget is an opportunity for government to address the simmering discontent and disillusion in rural India.

Written by Ashok Gulati | Published: February 15, 2016 12:02 am
The first two years of the NDA government will give an average agri GDP growth of just 0.45 per cent, way below even the population growth rate of about 1.3 to 1.4 per cent. The first two years of the NDA government will give an average agri GDP growth of just 0.45 per cent, way below even the population growth rate of about 1.3 to 1.4 per cent.

The first advance estimates of GDP growth, at 2011-12 constant prices, put the growth for FY16 at 7.6 per cent over the previous year. This is the highest growth rate in the first four years of the forgotten 12th Five-Year Plan. No wonder this makes the Narendra Modi-led NDA government somewhat upbeat. Much of the focus of the new government is on Make in India, especially in the manufacturing sector. But the manufacturing sector has not yet registered impressive growth, which makes several economists sceptical of the high overall GDP growth rates.

However, very few are talking about agriculture, whose pulse is sinking by the day. The optimistic growth forecast for FY16 is 1.1 per cent over the previous year’s minus 0.2 per cent. The first two years of the NDA government will give an average agri GDP growth of just 0.45 per cent, way below even the population growth rate of about 1.3 to 1.4 per cent. This, in effect, means that per capita income in agriculture has declined in the first two years of the Modi government. In contrast, the two terminal years of the UPA government registered an average agri GDP growth of 2.85 per cent (1.5 per cent in FY13 and 4.2 per cent in FY14).

Overall, the first four years of the 12th Five-Year Plan have registered an average agri GDP growth of just 1.65 per cent against an overall GDP growth rate of 6.75 per cent, a ratio of roughly 1:4, while the target always hovers around 1:2 — 4 per cent for agri GDP and 8 per cent for overall GDP. This may be the worst performance of agriculture in any Plan since the reforms began in 1991.

It is important to put these facts on the table because almost half of India’s workforce is engaged in agriculture, and almost three-fourths of India’s poor and malnourished reside in rural areas, where the main occupation is agriculture. What is the purpose of public policy? Is it not to alleviate poverty and malnutrition at the fastest rate possible? The UPA government in its second term had focused on the “dole” model — the National Food Security Act and the MGNREGA — and was ready to throw thousands of crores on these schemes in the hope that they would wipe out poverty and malnutrition. The intention was right but the model was not only conceptually weak but the programmes were destined to fail given the large leakages in them. The PDS had leakages of more than 40 per cent, and is actually nothing short of an annual scam in the country. Almost Rs 1,25,000 crore is shown in the budget as food subsidy for this flagship programme but few know that another Rs 70,000 crore-plus is pushed under the carpet as unpaid bills of the FCI. Similarly, the MGNREGA, though supposed to be self-targeting and a fall-back programme in years of distress (like droughts), not only has high leakages but the most important criticism, which even P. Chidambaram pointed out, is that the quality of assets created is poor, making it more like a dole. It is much better to spend money on programmes like the Pradhan Mantri Gram Sadak Yojana, which helps in building infrastructure and contributes to faster growth and reduction of poverty.

So I am not in favour of the dole model of the PDS and the MGNREGA type, but would support the growth model with at least one rider. It is not just growth per se but the nature of growth that also matters a lot if the objective of public policy is to wipe out poverty and malnutrition. It is in this context that agriculture must register at least half the rate of overall GDP growth in the economy. From that angle, targets of 8 per cent of overall GDP growth and 4 per cent for agriculture are fine and on conceptually robust ground. But the actual performance has always lagged a bit, and more so for agriculture, except in the 11th Five-Year Plan (FY08 to FY12), when agri GDP also grew at 4.1 per cent. The result of this high growth in agriculture was that poverty declined three times faster during 2004-11 than during 1993-2004.

The big question, therefore, for the Modi government is: Can it give at least 4 per cent growth in agriculture on a sustainable basis? When I politely asked the PM this in my last brief encounter, his reply was what could we do as these turned out to be drought years. Yes, fair enough, but visionaries and stalwarts are tested in difficult times. If the monsoons were good and prices were remunerative for farmers, they wouldn’t need government support. But today, the situation is grim in agriculture.

Farmers had great hopes from the NDA government, especially because the BJP had promised in its manifesto that it would make Indian agriculture more remunerative, assuring 50 per cent profits over costs. This was a great increase compared to the UPA government years, when most principal crops had profit margins of between 20 to 30 per cent. But the reality of the first two NDA years turned out to be nightmarish for farmers, with profits plunging to less than 5 per cent for most crops.

One after the other, farmer groups, which were great supporters of the Modi government, have been feeling disillusioned and deserting it. Even BJP workers who have links with the farming community whisper about their frustration in private with the agenda of their government, as they know it is elitist, which will accentuate inequality at the cost of simmering discontent in rural areas, for which they will have to pay a heavy political price.

Can the PM and finance minister show some bold moves in the forthcoming budget to put agriculture back on track to 4 per cent growth? I have serious doubts as the agenda has already been hijacked by the elites who want bank loans worth lakhs of crores of rupees to be written off for big business while the honest and hardworking farmer looks up with blank and hopeful eyes.

The writer is Infosys chair professor for Agriculture at Icrier, Delhi

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  1. R
    Feb 15, 2016 at 7:57 am
    Initiating new schemes is not going to serve the purpose all this distress in past two years has been due to our over reliance on rainfed farming....over reliance on monsoon its a question worth asking from government why still after 70 years of independence irrigation facilities penetration is minuscule and almost stagnant...rolling out new schemes in the garb of at least we are doing something is not going to serve the purpose agriculture today needs more than msp,fertilisers and crop insurance it needs a greater expertise of extension services,high yielding varieties,use of remote sensing to,delimitation of subsidised inputs by fixing a cap on rich and poor farmers .
    1. K
      K SHESHU
      Feb 15, 2016 at 11:58 am
      Agriculture suffers from chronic neglect by successive governments at the centre. The dependence on agriculture is more than half the potion but funds allocated to it are miniscule. As long the priority is not set right, there will be no let -up in farmers sufferings in the country.
      1. Kuldeep Saxena
        Feb 15, 2016 at 2:14 pm
        It is true that there has been thrust on industrial development and growth, it is clear that the things are on positive note but it will take time for the results visible on Indian Map though the efforts of our PM Mr. Modi are remarkable but what have we thought about agriculture segment There seems fall in agriculture production certainly due to failure of Mansoon and that has a direct impact on rising prices of agricultural products to the tune of about 30 to 40% and the graph has been having rising trends in the times to come. But what bother us more is the investment in agriculture segment taking into consideration the involvement of work force in the segment. We have been taking about better prices for the farmers and for protecting the famers interest but the things seems to be negligible from the right support price to the irrigation facilities to be looked into. We find that there seems to be a neglect on agricultural segment that seems to be a real danger in the times to come if the government works out on the segment and that will have problems for the poor and middle cl due to the high inflationary trends in agricultural segment fer want for neglect.
        1. S
          Feb 15, 2016 at 8:25 am
          I agree with the author that bold steps are needed to make agriculture compeive. It is also better to integrate MGNREGA and PMGSY as one scheme, so that latter gives employment to more people as well as provide them additional skills. PDS also needs to be reworked, but those who are very poor need more and now those who can do without it also are getting it leading to leakage.
          1. V
            v b
            Feb 17, 2016 at 2:27 pm
            While agricultural production should grow to the extent possible by supply of better inputs including better seeds, pesticides, water for irrigation, fertilisers, farm practices etc., the following steps seem to be imperative: (1) Get Cooperatives of Farmers compulsorily formed such that the land-holding of each cooperative is not less than 25 acres in order to combat the drawback of smallness of marginal and small farmers (who consute 80% of farmers) in procurement of inputs as well as marketing of outputs (2) To get better output out of limited supply of water, get drip irrigation pipes distributed at the cost of the Government (3) Get established in or near each village Units for storage, grading, quality certification and first-level processing of agricultural produce with the object of minimising wastage and cost in storing and in transit and maximising realisation of proceeds of for farmers (4) Enable farmers to market their produce directly to large-scale consumers and cooperatives of small-scale consumers with the object of minimising the role of intermediaries who are said to gobble up around 40% to 60% of the price paid by consumers
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