In his Independence Day speech, the prime minister referred to farmers 12 times. He talked about several achievements in agriculture — providing soil health cards to nine crore farmers and the enhanced crop insurance scheme. He also mentioned that 99 projects under the Pradhan Mantri Krishi Sinchayi Yojana will be completed by 2019, FDI in food processing will be encouraged, supply of inputs to farmers will be ensured and they will be assisted in marketing their produce. The PM concluded by saying, “Together we will build such an India where the farmers can sleep without worry. In 2022, they will earn double of what they earn today”.
The first time the PM had shared his dream of doubling farmers’ income (DFI) was at a kisan rally in Bareilly on February 28, 2016. A day later, the finance minister talked about this goal in his budget speech. Thereafter, this goal attracted the attention of policymakers, economists and most importantly, farmers. Initially, it was not clear if the government intended to double the real income of farmers or their nominal income. It is now evident that the government’s aim is to double the real income — recent reports of the Committee on Doubling Farmers’ Income spell out this goal.
On April 13, 2016, the government set up a committee under Ashok Dalwai, then additional secretary in the Union ministry of agriculture, to prepare a report on DFI. The committee seems to have prepared a 14 volume report of which four volumes — 718 pages in all — have been uploaded on the ministry’s website as of August 14. The 14 volumes could have more than 2,000 pages in all, and more than 300 recommendations. It would be quite a test for the PM to read the entire report and make sense of it in order to initiate policy action. The report has information, which can be very useful for a Ph.D student, but it also has several inconsistencies that leave the reader confused, reminding one of Albert Einstein’s famous quote “If you can’t explain it simply, you don’t understand it well enough.”
The report pertains to three areas — productivity gains, reduction in cost of cultivation, and remunerative prices. Strategic framework has four concerns — sustainable agri-production, monetisation of farmers’ produce, re-strengthening extension services, and recognising agriculture as an enterprise. The report also uses an econometric model to work out the investment needed in agriculture, irrigation, rural roads, rural energy and rural development to attain 10.41 per cent annual growth in real incomes for DFI by 2022-23 over the base of 2015-16. The point to be noted is that farmers’ real incomes have increased by only 3.5 per cent per annum during 2002-03 to 2012-13.So, DFI means three times higher effort and resources. That means a humungous additional investment of about Rs 6,40,000 crore at 2011-12 prices. And this does not include investments in agri-logistics, cold chains, etc. Eighty per cent of this investment has to come from the government. The investments in and for agriculture need to rise by 22 per cent per annum in real terms if the dream of DFI is to be realised.
So, DFI means three times higher effort and resources. That means a humungous additional investment of about Rs 6,40,000 crore at 2011-12 prices. And this does not include investments in agri-logistics, cold chains, etc. Eighty per cent of this investment has to come from the government. The investments in and for agriculture need to rise by 22 per cent per annum in real terms if the dream of DFI is to be realised.
But the report is totally silent on how, and from where, these resources will be generated. In a climate of loan waivers, subsidies, and welfare programmes (see Graph 1) that dominate the budget, the likely reality is that investments are going to shrink further.
But even if one makes the assumption that this humongous investment will somehow be made, there are two questions that beg for answers. How much will agri-production increase as a result of this investment? Where will that increased production be absorbed? We have seen that when production increases somewhat significantly, prices crash — this year in several states, prices of onions, potatoes, pulses and oilseeds crashed when production increased. If domestic consumption can’t absorb increased outputs, can we export competitively in global markets? The report does not answer any of these fundamental questions. Instead, we have a laundry list of hundreds of recommendations, ranging from implementation of the Agriculture Produce and Livestock Marketing, (Promotion and Facilitation) Act to e-NAM to negotiable warehouse system to price deficiency payments to re-organising KVKs and setting up a secretariat for DFI.
The report does not answer any of these fundamental questions. Instead, we have a laundry list of hundreds of recommendations, ranging from implementation of the Agriculture Produce and Livestock Marketing, (Promotion and Facilitation) Act to e-NAM to negotiable warehouse system to price deficiency payments to re-organising KVKs and setting up a secretariat for DFI.
Does it then mean that DFI will remain a pipe dream by 2022? Most likely, though not necessarily. In order to take this dream closer to reality, one may look at the Chinese experience during 1978-84, when the country doubled farmers’ real incomes in six years and reduced poverty by half (India took 18 years, from 1993 to 2011, to cut poverty by half). China focused primarily on incentives for farmers by moving from the commune system to the household responsibility system in land, and ensured higher prices for farmers. Chinese prices for farmers are way above that in India. To cite one example, China’s MSP for wheat in 2014-15 was $ 385 per tonne against India’s $ 226 per tonne. Similar differences exist for other crops (see Graph 2). This was on top of $ 22 billion of input subsidies.
The upshot of this example is that India needs to focus on incentives for farmers. Unfortunately, our policy is biased in favour of the consumers and that inadvertently makes it anti-farmer. The Narendra Modi government can address that issue by using an income policy to protect the poor, and free up prices for farmers, allow private trade to stock and operate freely and have unhindered exports. India can, then, raise farmers’ incomes significantly, if not double them by 2022.
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