1. Column: Doubling farmers’ income by 2022

Column: Doubling farmers’ income by 2022

For the last two months, the Narendra Modi-led government seems to be in an overdrive to appease farmers. Several farmer rallies have been organised in Madhya Pradesh, Karnataka, Odisha, Uttar Pradesh, and recently at New Delhi’s Krishi Unnati Mela.

By: and | Updated: March 28, 2016 8:51 AM
budget farming irrigation If PM Modi can keep food price inflation, say, below 5-6 %, and raise farmers’ nominal incomes by 12% per annum. (Reuters)

For the last two months, the Narendra Modi-led government seems to be in an overdrive to appease farmers. Several farmer rallies have been organised in Madhya Pradesh, Karnataka, Odisha, Uttar Pradesh, and recently at New Delhi’s Krishi Unnati Mela. Budget FY17 also echoed the ‘focus’ on farmers and rural poor. All the vociferously-shared strategies and visions have one thing in common: the PM’s ‘dream’ to double farmers’ incomes by 2022, when India celebrates its 75th year of Independence.

Without doubt, the dream is to rekindle hope among the peasantry, currently reeling under acute distress caused by back-to-back droughts, falling agri-prices and dwindling incomes. The prime minister is hard-selling his dream with a detailed strategy to realise it. According to him, agriculture has to stand on three pillars—paramparagat kheti (traditional crop), diversification to 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 not only reduce risk in farming but augment farmers’ incomes. He weaves his strategy with programmes such as distribution of soil health cards and neem-coated urea for the health of ‘Mother Earth’, more resources for irrigation and use of MGNREGS for recharging ground water through check dams and farm ponds construction. The picture is rounded out with 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 the right ones for any meaningful agri-strategy. But haven’t these been in existence for some time now, in some form or the other? What novel idea is the new strategy spelling-out, one that will enable the country to double farm income in six years?

Before one assesses the seriousness of this dream/promise, one must be clear about what the PM is actually committing to. What the nation would really like to know is whether he is talking in terms of doubling nominal or real incomes of farmers. Whenever one talks of doubling of national income or sectoral incomes, one means it in real terms. Doubling of farmer incomes in six years, if it is in real terms, would be the miracle of miracles, as it would imply a compounded annual growth rate of 12%. But as they say, nothing is impossible. Madhya Pradesh has registered 14.2% real agri-GDP growth rate in the last five years, and states like Jharkhand, Chhattisgarh, Gujarat, Himachal Pradesh, Rajasthan, and even Bihar, have also witnessed above 7% agri-growth.

Internationally, China’s farm incomes grew at 14% per annum, and agri-GDP at 7.1%, during the first six years of economic reforms (1978-86), which helped in cutting poverty by half. It generated huge demand for industrial products in rural areas, which was 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, by incentivising peasantry by dismantling the commune system in land, and freeing up agri-prices. Lately, China has been heavily supporting farm prices. Their MSP for wheat in 2014-15, e.g., was $385/tonne compared to India’s $226/tonne. Similarly, rice MSP was $440/tonne for Indica rice and $500/tonne for Japonica rice vis-a-vis only $330/tonne in India.

Does the PM plan to raise 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 his own constituency of Varanasi, market prices of paddy were 15-20% below MSP in the last kharif season. Absence of a robust procurement machinery in the eastern belt is a major stumbling block holding back a second Green Revolution.

So, the other path to doubling farmer incomes would be to raise productivity,diversify production towards high-value agriculture and shift a major portion of farm employment to non-farm activities. Raising productivity requires massive investments in agri-R&D, irrigation and fertilisers. Compared to China, India is far behind, and our productivity is half to three-fourths of China’s. Diversification to 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 their processing levels (through the organised sector) is much less than international levels. Encouraging processing and building value-chains would help create non-farm jobs in rural areas. Unless all these forces combine and create synergy, 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 in the UPA regime, too. During 2008-09 to 2013-14, India’s agri-GDP at current prices grew at 14.8% annually on average, with wholesale food articles’ inflation averaging 11.7%, and real agri-GDP only at 3.1% per annum. Farm wages also grew at an average rate of 18.8% in nominal and 7.5% in real terms in the 6 years! So, what is new that PM Modi is promising?

If PM Modi can keep food price inflation, say, below 5-6 %, and raise farmers’ nominal incomes by 12% per annum, it will still be commendable. Otherwise, there is nothing novel about what PM Modi is selling. It is old wine in a new bottle. Therefore, unless slogans marry mission-mode-action, we are afraid, the dream will only remain so, branding the man as nothing more than an affable sapno ka saudagar!

Gulati is Infosys Chair professor, and Saini is a consultant at ICRIER

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