Call it bad luck or otherwise, the Narendra Modi government’s first year in office hasn’t been a really great one for agriculture and rural incomes.
To start with, rainfall was deficient in both the south-west (June-September) and the north-east (October-December) monsoon seasons by over 12 per cent and 33 per cent, respectively, for the country as a whole. Worse, heavy rains accompanied by hailstorms in March damaged the ready-to-be-harvested rabi crop in many parts.
The combination of monsoon failure during the crucial sowing/vegetative growth stages and excessive rains when least required led to lower crop production in 2014-15 compared to the record levels of 2013-14, which happened to be the last year of the erstwhile UPA regime (see graph).
But it wasn’t output alone; farmers also suffered from drop in crop prices.
Average realisations on kapas (un-ginned cotton) were around Rs 3,900-4,000 per quintal this time, as against Rs 4,800-4,900 obtained in 2013-14. Farmers also experienced price declines in basmati paddy (from Rs 4,100-4,200 to Rs 2,500-2,600 per quintal), soybean (from Rs 3,600-3,700 to Rs 3,000-3,100 per quintal) and rubber (from Rs 150-155 to Rs 115-120 per kg). The crash in ex-factory sugar realisations to Rs 25 per from the Rs 29-31/kg levels of the previous two years, likewise, resulted in cane payments arrears of mills to growers crossing Rs 20,000 crore.
The dual impact of lower production and falling crop realisations have translated into contraction of rural incomes, accentuated further by cutbacks in MGNREGA wage spends despite a drought year. All these have, in turn, affected sales of tractors, agri-inputs, two-wheelers and a host of FMCG and consumer durable products that had registered impressive growth in the past decade on the back of rising rural purchasing power.
True, the contributory factors here have been largely external. The decline in crop production could be blamed on extreme weather events, just as lower price realisations had mainly to do with the slide in international commodity prices. Between May 2014 and April 2015, the FAO’s widely-tracked global Food Price Index plunged nearly a fifth from 210.4 to 171 points, after having more than doubled from its 2002-04 base of 100 and peaking at 238 points in February 2011.
But the Modi government may have also faltered by not taking cognizance early on of the crisis signals emanating from the rural countryside on account of falling crop prices. The choice of someone with not quite the stature or political heft of a Sharad Pawar to head Krishi Bhawan, India’s premier farm research institute (IARI) being headless for almost ten months now, and widespread shortages and black-marketing of urea because of the failure to contract imports in time for rabi season plantings – all pointed to the agriculture sector not receiving the necessary attention.
That, however, changed with the promulgation of the Land Acquisition Ordinance diluting the farmers’ consent requirement and return of unused acquired land provisions in the 2013 Act passed during the UPA period. Against the background of renewed agrarian distress and havoc wreaked by the unseasonal rains, it gave sufficient ammunition to a united Opposition to brand the Modi sarkar as “anti-kisan”.
Since then, the government has been on an overdrive to counter criticism of being insensitive to farmers’ problems. It has hiked compensation amounts for crop loss due to natural disasters by 50 per cent, while making farmers suffering even one-third damage eligible for relief, as against the earlier 50 per cent minimum threshold.
Besides, significant relaxations in quality specifications for wheat procurement have been granted for the current marketing season to prevent distress sales of the rain-affected crop. Farmers have been paid the official minimum support price, sans any value cuts, for wheat with up to 10 per cent shriveled/broken grains and 50 per cent luster loss content.
Indian agriculture had a reasonable run during the ten years under UPA because of improved farmers’ terms of trade (see table), even if that may have owed itself more to high international crop prices than any imaginative policymaking from the then government. High overall economic growth also enabled an estimated 37 million people to be pulled out from farms between 2004-05 and 2011-12, thanks to large-scale job generation in construction, manufacturing and services sectors. The last one year has seen an unraveling of the global commodity “super-cycle”, unleashing renewed farm distress and pressure on rural incomes.
Dealing with its consequences, while simultaneously creating enough non-farm employment opportunities, is going to be this government’s biggest challenge — both economically and politically.