From Plate to Plough: Raising farmers’ income by 2022

The picture is completed by the Pradhan Mantri Fasal Bima Yojana (crop insurance) and e-market platform that he is going to launch on April 14.

Written by Ashok Gulati , Shweta Saini | Updated: March 28, 2016 12:14 am
rural infrastructure, agrarian crisis, Madhav Chitale, indian farmer, farmer, rainfall, irrigation projects, mumbai news, maharashtra news, Indian Express Before one assesses the seriousness of this dream-promise, one must be clear about the PM’s commitment.

For the last two months, the Narendra Modi government seems to have gone into an overdrive to appease farmers. Several farmer rallies have been organised and the common theme has been the PM’s “dream” to double the incomes of farmers by 2022.

According to the PM, agriculture has to stand on three pillars — paramparagat kheti (traditional agriculture), diversification into agro-forestry by planting trees on the boundaries of farmers’ fields, and encouraging livestock and bee-keeping, duly supported by food processing. These pillars will reduce the risks in farming, and augment farmers’ incomes. He weaves his strategy with programmes such as soil health cards and neem-coated urea to take care of “mother earth’s” health; giving more resources for irrigation and using the MGNREGA for recharging ground water through check dams and farm ponds, thus, getting more crop from every drop of water.

The picture is completed by the Pradhan Mantri Fasal Bima Yojana (crop insurance) and e-market platform that he is going to launch on April 14. All these nodes are right for any meaningful agri-strategy. But haven’t these been in existence in some form or the other? What is the novel idea in this strategy that will double farmer incomes in six years?

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Before one assesses the seriousness of this dream-promise, one must be clear about the PM’s commitment. What the nation would really like to know is whether he is talking of doubling nominal incomes or real incomes. Whenever one talks of doubling, say, national income or sectoral incomes, one means it in real terms. Doubling of real incomes in six years would be a miracle of miracles, as it would imply a compound growth rate of 12 per cent per annum. But as they say, “nothing is impossible”. Madhya Pradesh has registered 14.2 per cent growth in real agri-GDP over the last five years, and states like Jharkhand, Chhattisgarh, Gujarat, Himachal Pradesh, Rajasthan, and even Bihar have witnessed agri-growth in excess of 7 per cent.

Internationally, China’s farm incomes grew at 14 per cent per annum, and the agri-GDP at 7.1 per cent, during the first few years of economic reforms (1978-86). This helped in halving its poverty in just six years. It generated a huge demand for industrial products in rural areas, which were met by scaling up town and village enterprises (TVEs).

This also gave political legitimacy to carry on economic reforms more aggressively. How did China achieve this? Very briefly, they incentivised the peasantry by dismantling the commune system in land, and freeing up agri-prices. Lately, China has been heavily supporting farm prices. For instance, their MSP for wheat in 2014-15 was $385/tonne compared to India’s $226/tonne.

Does PM Modi plan to raise the MSPs of agri-products substantially? The MSPs announced in the first four crop seasons under his regime do not indicate any such move. On the contrary, their rise has been largely suppressed. Moreover, in much of eastern India, including in his own constituency of Varanasi, the market prices of paddy prevailing in the last kharif season were15-20 per cent below the MSP. The absence of any robust procurement machinery in the eastern belt is one major stumbling block that is holding back the second green revolution there.

So, the other paths to doubling farmer incomes would be raising productivity and diversification into high-value agriculture as well as diversification of farm employment into non-farm activities. Raising productivity requires massive investments in R&D, irrigation and fertilisers. Compared to China, India is way behind in all these factors and, not surprisingly, our productivity levels, in almost all crops, range between 50 to 75 per cent of Chinese levels.

Diversification into high-value agriculture requires a value-chain approach, and we are lagging behind in that, too. India may be producing 145 million tonnes of milk and more than 270 million tonnes of horticulture products but our processing levels (in the organised sector) are way below — less than 20 per cent in milk, and less than 5 per cent in fruits and vegetables — international levels. Encouraging processing and building value-chains would help create non-farm jobs in rural areas. Until all these factors come together, Modi’s dream of doubling real farm incomes by 2022 will remain far-fetched.

That brings us to the possibility of doubling farmers’ incomes in nominal terms, by letting price increases raise incomes. But this has been done during the UPA regime too. Between 2008-09 and 2013-14, India’s agri-GDP at current prices grew at 14.8 per cent annually on average, with wholesale food article inflation averaging 11.7 per cent, and real agri-GDP growing at only 3.1 per cent per annum. Farm wages also grew at an average rate of 18.8 per cent in nominal terms and 7.5 per cent in real terms in these six years. So, what is new that Modi is promising?

If Modi can keep food price inflation below 5-6 per cent, and raise farmers’ nominal incomes by 12 per cent per annum, it will still be commendable. Otherwise, there is nothing novel about what Modi is selling: It is just old wine in a new bottle. Therefore, unless this slogan is backed by action, that too in mission-mode, it will remain just a dream and the PM will be branded nothing more than an affable “sapno ka saudagar”.

Gulati is Infosys chair professor, and Saini is a consultant at Icrier, Delhi

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  1. H
    Haradhan Mandal
    Mar 28, 2016 at 9:12 am
    It was a playing with words 'Farmers Income will be doubled in 2022. Because, if not anything, inflation will make the INCOME DOUBLE in 2022 with present rate of Inflation and Pay commission Reports (and the NPAs of PSUs). And the people who coined/coins SUCH slogans - they know what they are saying. But they don't know that farmers (not just the Economists) also know Economics and Theories of Inflations. It is like the TANTALIZING and alluring SLOGAN 'Retire with 1 CRORE (after 30 years)'! (After 30 years)!
    Reply
  2. M
    MyTake
    Mar 28, 2016 at 6:41 pm
    No matter what Congie and Leftie ruled state will never be able to double the income by 2022. This is for the reason that they won't like that happen! Who would kill the goose that lays golden eggs of "bringing them to power"?
    Reply
  3. T
    TIHAEwale
    Mar 28, 2016 at 5:00 am
    Heeeeee . this tells all . That brings us to the possibility of doubling farmers’ incomes in nominal terms, by letting price increases raise incomes. But this has been done during the UPA regime too. Between 2008-09 and 2013-14, India’s agri-GDP at current prices grew at 14.8 per cent annually on average, with w food article inflation averaging 11.7 per cent, and real agri-GDP growing at only 3.1 per cent per annum. Farm wages also grew at an average rate of 18.8 per cent in nominal terms and 7.5 per cent in real terms in these six years. So, what is new that Modi is promising?
    Reply
  4. S
    ss
    Mar 28, 2016 at 3:45 am
    No point wasting money in low productivity. low income agriculture. We need to get the people off the land . Give the skills that would make them employable in non farm sectors where they can expect higher incomes , stable incomes.
    Reply
  5. R
    Raghunathan
    Apr 22, 2016 at 2:57 pm
    Mr.Gulati is a highly respectable agricultural sicentist. Most of his comments and observations may be correct. But no body can doubt the sincerity of P.M. Modi. It is time people like Gulati offer their sincere suggestions and advice to the government and make things work than just critisize and say I told you so.
    Reply
  6. R
    RAJENDRA SHAH
    Mar 28, 2016 at 10:28 am
    TO DOUBLE THE INCOME WITHIN 6 YEARS MEAN 12% COMPOUNDED GROWTH and IT SEEMS IT WILL BE ANOTHER ZUMLA FROM MR. MODI. IF HE HAS INCREASED THE MSP IN 2014-15 BY 50% OF COST OF PRODUCTION AS PER HIS PROMISE and CONTINUED IN FOLLOWING YEARS THEN WE ARE HOPEFUL FOR THE COMMITMENT. BUT IT HAS NOT HAPPENED DUE TO FEAR OF FOOD INFLATION. SO TO ACHIEVE THIS MR. MODI MUST CONTROL THE MEDIATORS and APMC WHO ARE THE REAL CULPRIT OF FOOD INFLATION. ALSO TO BRING DOWN THE COST OF PRODUCTION HE HAS TO CURTAIL THE SUBSIDY ON UREA BY OFFERING HIGHER SUBSIDY TO ANOTHER FERILIZERS LIKE NPK and SSP and THIS WILL INDUCE THE FARMERS TO CURTAIL THE CONSUMPTION OF UREA and INCREASE THE CONSUMPTION OF NPK and SSP WHICH WILL INCREASE THE SOIL FERTILITY and IMPROVE THE YIELD WHICH WILL HELP HIM TO BRING DOWN THE COST OF PRODUCTION
    Reply
  7. S
    SP
    Mar 28, 2016 at 8:13 am
    We need to look at a comprehensive plan that ranges from eliminating distress, making sector compeive to boosting the farm income. There is enough expertise to create a plan and track it to success. Spending money on Fertilizer subsidy and interest subvention should be avoided. We should see how far we can make agriculture sector more trade-able and unique by making it more eco-friendly.
    Reply
  8. V
    v b
    Mar 28, 2016 at 4:58 pm
    If the undermentioned leakages from the incomes of the farmers are plugged the farmers’ incomes can be doubled in just one year, not five years:lt;br/gt;(1) The price baid by the consumer is gobbled up to the extent of 50% or more. This can be done away with or reduced if the farmers make supplies directly to the consumers with enquiries and orders coming in over internet and even one individual has a Smart Phone or Computer in each village. The supplies may be made to large-scale consumers (such as Restaurants, Caterers, Hospitals, Hostels), Cooperatives of small-scale consumers (which may be none other than the Residents’ Welfare ociation of Urban Colonies and Multi-store Buildings), cooperatives of PDS beneficiarieslt;br/gt;(2) Loss on account of poor storage can be done away with if near or in each village a Public Warehouse (whose Receipts may be pledged with a Bank to avail of finance) is set up and loss on account of demand for the produce being so low as not to cover costs can be warded off by setting up small-scale processing unit in or near each village for processing agricultural produce lt;br/gt;(3) Loss of crop due to untimely rain or scarcity of rainfall, poor quality of seed, pesticide and fertilisers, floods is compensated by insurance under PMFBY.lt;br/gt;The farmers’ incomes can be further augmented by steps such as the following: augmenting the availability of water and electricity for irrigation, matching manures to the soil health, conserving water through installation of Drip Irrigation Pipes, optimising the use of water by going in for a crop and type of seed that matches the availability of water
    Reply
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