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Saturday, December 14, 2019

From Plate to Plough: Promises to the farmers

Whichever party comes to power at the Centre, India is making a policy shift to direct income support.

Written by Ashok Gulati , Ritika Juneja | Published: April 15, 2019 12:18:10 am
What was expected from the main political parties were bold promises to reform agri-markets.(Illustration: CR Sasikumar)

The festival of democracy started with the first phase of polling on April 11. Ideally, it should be celebrated like Holi, forgetting past enmity and embracing each other with love. But, unfortunately, it is being fought like the battle of Kurukshetra in the epic, Mahabharata. All the weapons of politics — saam, daam, dand, bhed — are being used. Saam reaches for accord with other parties, daam uses money power to buy votes, dand uses the CBI to raid the camps of opponents, and bhed divides voters on caste/religious lines.

Voters are in a quandary as the political parties have promised the moon in their manifestos. They know that most of these promises will be forgotten once the elections are over. Yet, one must look at manifestos which reflect the best intentions of the parties. We examine some of these with respect to farmers and the poor, normally agri-labourers. Given that the full list is too extensive, we focus only on the big ticket promises.

BJP’s sankalp patra (manifesto) promises to double farmers’ income by 2022-23, a reiteration of its earlier promise. Under that heading, it lists 29 promises/schemes. The most notable one is PM-Kisan (Pradhan Mantri Kisan Samman Nidhi Yojana), which will be extended to all farm families. It promises to give each farm family Rs 6,000 per year. With an estimated 14.6 crore farm families as per the 2015-16 survey, this would cost about Rs 87,600 crore per annum. This may be the largest direct income support (DIS) by the government of India (GoI). But as a NABARD survey on financial inclusion showed, the average farmer household income was Rs 8,931 per month in 2015-16, which by now must have crossed Rs 10,000 per month (or Rs 1,20,000 per annum) in nominal terms, after adjusting for inflation. So, a support of Rs 6,000 per year is a meagre five per cent support. Doubling of farmers’ income surely requires much more than this DIS.

The Dalwai Committee set up by the Narendra Modi government in 2016 had made it clear that the promise to double farmers’ income is, in real terms, with the base year of 2015-16. It calculated that it would need 10.4 per cent growth per annum in real terms from 2016-17 to 2022-23 to double farmers’ real incomes. The past record of growth in real incomes of farmers during 2002-03 to 2015-16 shows that they increased at 3.7 per cent per annum, and this growth follows very closely the growth in agri-GDP. The Modi government’s five year record of agri-GDP is pretty low at 2.9 per cent per annum. That means for the remaining four years, the growth in farmers’ real incomes has to be almost 15 per cent per annum. This is next to impossible given the existing set of policies. No wonder the Congress party calls it the Modi government’s jumla.

We feel that if India achieves a 4 to 5 per cent growth in agri-GDP on a sustainable basis, it would need to export aggressively lest it creates glut at home, adversely impacting farmers’ incomes. But the Modi government’s record on agri-exports is most pathetic. From a peak of about $43 billion agri-exports in 2013-14, that it inherited from UPA 2, till date, its exports have remained below that peak — meaning negative growth all through the five years of Modi government. This is one major reason behind the farm distress.

What was expected from the main political parties were bold promises to reform agri-markets. But the BJP manifesto is quite silent on this. In that sense, the Congress manifesto scores better by explicitly promising to reform the Essential Commodities Act, repealing the Agricultural Produce Marketing Committee, freeing exports, etc. How they will do all that is yet to be seen, but at least the thinking and intent is in the right direction. Also, the Congress promises Rs 72,000 per year to the bottom 20 per cent families under its NYAY scheme, which may include many small and marginal farmers, tenants, agri-labourers. It is likely to cost the fisc Rs 3.6 lakh crore, almost four times what the BJP’s PM-Kisan will cost. Obviously, everyone is asking where this money will come from: That’s not spelt out in the manifesto. Since the Congress manifesto also gives a time-frame under which it will be implemented, it seems serious about it.

In both cases, it is clear that India is on the road to a major shift in policy towards DIS, triggered by Telangana’s Rythu Bandhu and followed by Odisha’s KALIA scheme. This move towards DIS can be a tectonic shift in policy if it subsumes at least food and fertiliser subsidies, and, if possible, power subsidies at the state level. Currently, the food subsidy is Rs 1.84 lakh crore with pending bills of FCI of Rs 1.3 lakh crore as on April 1, 2019. Fertiliser subsidy is Rs 75,000 crore with pending bills of about Rs 30,000 crore. If all these are merged and given as DIS to identified beneficiaries, that would be the wisest move by whichever party comes to power. Incidentally, much of this was recommended to the Modi government in 2015 by the Shanta Kumar panel report, a high-powered committee set up by the Modi government itself. Maybe it is time to pick it up and implement it.

There are many other promises: The BJP promises zero-interest loans to farmers up to Rs 1 lakh. The trouble with such schemes is that they lead to massive diversion of agri-loans to non-agri-purposes. The Modi government had made a big move in revamping crop insurance in 2016, but its rollout suffered teething problems. The test of the existing scheme would be in a drought year, but making it voluntary may shrink its coverage. There is the promise of investing massive amounts in agriculture (Rs 25 lakh crore) without much details. Such promises remain meaningless. But who cares, it is time to see the dance of democracy!

Gulati is Infosys Chair Professor for Agriculture and Juneja is Consultant at ICRIER

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