The weakest link

Among the Modi government’s many hits was one crucial miss — agriculture.

Written by Ashok Gulati | Published: May 25, 2015 12:00 am
Narendra Modi, Modi, Narendra modi agriculture policies, Narendra Modi policies, Modi government policies, Modi government agriculture policies, Modi policies, Modi news, Indian Express, editorials, India News India’s reforms started with stealth, and started from the top. It benefited those better off more. Poverty halved, but it took 18 years, compared to just six years in China.

The Narendra Modi sarkar’s performance in the first year has at least five major achievements and one major miss. To ensure that this neglect does not become its Achilles’ heel, the Modi sarkar will have to focus on and initiate reforms in this weakest link in the chain — agriculture. Else, it will not let the Indian economy fly at the speed and height that Modi wants.

The Modi sarkar is up for evaluation by everyone. It will be judged by how much it has worked on the promises made to the masses, and if it has put the economy on a sustainable growth path — the key issues in a democracy. Everyone has their own take. Here is mine.

Last year, when the election campaign was at its peak, the headlines that dominated against the UPA government were to do with scams, high inflation and policy paralysis, which were adversely affecting India’s image internationally. All of that seems to have waned or disappeared. In that regard, one can count at least five hits of the Modi sarkar.

Modi’s biggest hit, in my humble opinion, is making India count globally. He is busy sowing early India seeds in all the major global powers, be it the US, Japan, China, France or Germany. He has done so in our neighbourhood, too, from Bhutan and Nepal to Sri Lanka. He is travelling relentlessly, inviting businesses to “Make in India”, and easing visa formalities. Hopefully, these seeds of friendship and prospective investment will sprout soon, and Modi can harvest a rich crop in the ensuing years. The Opposition will, however, term it as a mere PR exercise.
So far, one has not heard of any scams at the ministerial level in Lutyens’ Delhi. There may be, and have been, some goof-ups in policy, but no one has blamed these on corruption. The handling of the coal and spectrum auctions has brought reasonable transparency to the system, and will also help improve the government’s fiscal health.
Policy paralysis is fading fast. Several bills in Parliament bear testimony to this. Indeed, Parliament has been more productive than in the last few years, in terms of debate and clearing bills.

Inflation in general — and food inflation in particular — has been brought under control, partly by policy and partly by luck, since global prices came tumbling down. Although there is scope to bring inflation down further, the Modi government now has time to breathe and plan for a long-term strategy to tame prices.

On the social front, the high priority accorded to financial inclusion, leading to the unprecedented success of the Jan Dhan Yojana, is commendable. The programme could be a game changer if combined with Aadhaar and mobiles (JAM), and if most subsidies are directly transferred to the accounts of beneficiaries, as already done in the case of the gas subsidy. Three recently launched schemes— the Pradhan Mantri Suraksha Bima Yojana, the Pradhan Mantri Jeevan Jyoti Bima Yojana and the Atal Pension Yojana — could together be a major leap in strengthening social security of the masses in the unorganised sector.

There must, of course, be many other hits, especially in socio-political mobilisations like the Swachh Bharat Abhiyan and in the BJP’s membership crossing 10 crore. But let us focus on the economy here.

What is the Modi sarkar’s biggest miss? It is agriculture and increasing farmer distress. There have been two bad seasons, and if the third also goes out of gear, the Modi sarkar may be in for trouble. Raising insurance compensation without putting the insurance system on a strong footing is not going to help much. Neither will soil health cards, if the current system of subsidies is not rationalised.

While Modi made significant strides during his visit to China, landing 26 business deals worth $22 billion, none of of these was related to agriculture. But the biggest lesson that the Modi sarkar could learn from the China visit lies in agriculture. China produces more than 600 million tonnes of foodgrain, compared to India’s 251 million tonnes in FY2015, from a cropped area that is less than India’s and with a holding size that is almost half of India’s (1.15 hectares).

Moreover, it is important for Indian policymakers to know that China started its economic reforms with agriculture, not industry. During 1978-84, the period which marks the beginning of China’s economic reforms, the country abandoned the commune system and graduated to the household responsibility system in land. This is well known. What is not known widely is that China also liberated controls on agriculture pricing to a large extent. As a result, its agriculture grew by 7.1 per cent per annum, while farm incomes increased by 14 per cent per annually, and rural poverty halved in the six years between ’78 and ’84.

It is this “firing from the bottom”, or starting with agriculture, that gave political legitimacy to economic reforms in China, as it benefited the largest number of people. This unprecedented rise in rural incomes also created huge demand for simple industrial products, ranging from televisions and toys to refrigerators. And this opportunity was grabbed by town and village enterprises, which led to the manufacturing revolution in China. The rest is history.
India’s reforms started with stealth, and started from the top, correcting exchange rates and industrial licensing etc. It benefited those better off more. Poverty halved, but it took 18 years (1993-2011), compared to just six years in China, as India had to rely on the trickle-down effect.

Investment in agriculture, especially irrigation, research and development in this sector, and one common all-India market, are critical. These will have high payoffs, politically and economically. Remember, the three BJP chief ministers who came back to power three times in a row (in Gujarat, Madhya Pradesh and Chhattisgarh) all headed states where agricultural GDP grew at more than 7 per cent per annum over a decade, that is, from 2001-02 to 2011-12. Nobody knows this better than Modi himself, as he has harvested the biggest political crop from it. If only he would now focus on this weakest link, and make sure that India’s growth story is put on a sustainable trajectory.

The writer is Infosys chair professor for agriculture at Icrier.

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