The first advance estimates of GDP growth at 2011-12 constant prices put the growth for FY16 at 7.6% over the previous year. This is the highest growth rate in the first four years of the forgotten 12th Five-Year Plan. No wonder, this makes the Narendra Modi-led NDA government somewhat upbeat. Much of the focus of the new government is on Make-in-India, especially in the manufacturing sector. But the manufacturing sector has not yet registered any impressive growth, which makes several economists sceptical of the high overall GDP growth rates.
However, very few are talking about agriculture whose pulse is sinking by the day. The optimistic growth forecast for FY16 is 1.1% over previous year’s minus 0.2%. The first two years of NDA government will give an average agri-GDP growth of just 0.45%, way below even the population growth rate of about 1.3-1.4%. This, in effect, means that per capita income in agriculture has declined in the first two years of the Modi government. In contrast, the two terminal years of the UPA government registered an average agri-GDP growth of 2.85% (1.5% in FY13 and 4.2% in FY14).
Overall, the first four years of the 12th Five Year Plan so far give an average agri-GDP growth of just 1.65% against an overall GDP of 6.75%, a ratio of 1:4.1, while the targets always hover around 1:2 (4% for agri-GDP and 8% for overall GDP). This may be the worst performance of agriculture in any Plan since the reforms began in 1991.
The reason it is important to put these facts on the table is that almost half of India’s workforce is engaged in agriculture, and almost three-fourths of India’s poor and malnourished people reside in rural areas whose main occupation is agriculture. What is the purpose of public policy? Is it not alleviating poverty and malnutrition at the fastest rate possible? The UPA government, in its second term, had focused on a ‘doles’ model, encompassing the National Food Security Act and MGNREGA, and was ready to throw thousands of crores of rupees on these schemes with a hope that they will wipe out poverty and malnutrition. The intention was right, but the model, in my humble opinion, was not only conceptually on weak grounds, but the programmes themselves were destined to fail given the large leakages. PDS had leakages of more than 40%, and is actually nothing short of an annual scam. Almost R1.25 lakh crore in subsidies is shown in the budget as food subsidy for this programme, but few know that another R70,000-crore plus is pushed under the carpet as unpaid bills of the FCI. Similarly, the MGNREGA scheme, though supposed to be self-targeting and a fall-back programme in years of distress (like droughts), has not only had high leakages—its most important criticism, which even UPA era finance minister P Chidambaram pointed out, was that the quality of assets built under it is poor and this makes it more a dole model. It is much better to spend money in programmes like the Pradhan Mantri Gram Sadak Yojana that helps in building infrastructure and contributes to much faster growth and reduction of poverty.
So, I am not in favour of the doles model of PDS and MGNREGA type, but would support a growth-led model with at least one rider. It is not just growth per se, it is the nature of growth that matters a lot, if the objective of public policy is to wipe out poverty and malnutrition. And it is in this context that agriculture must register at least half the rate of overall GDP growth of the economy. From that angle, targets of 8% of overall GDP and 4% for agriculture are fine and conceptually on robust ground. But the actual performance has always lagged a bit, and more so for agriculture, except in the 11th Five Year Plan (FY08 to FY12), when agri-GDP also grew at 4.1%. The result of this high growth in agriculture was that poverty declined three times faster during 2004-11 than during 1993-2004.
The big question, therefore, for the Modi government is: Can it give at least 4% growth in agriculture on a sustainable basis? When I asked this very politely to the PM in my last brief encounter, his reply was what could we do as the last two years turned out to be drought years. Yes, fair enough, but visionaries and stalwarts are tested in difficult times. If monsoons were good and prices were remunerative for farmers, they don’t need government support. But today situation is grim for most of Indian agriculture.
Farmers had great hopes from the NDA government, especially because BJP had promised in its manifesto that they will make Indian agriculture more remunerative, assuring 50% profits over costs! This was a great lift compared to the UPA government, when most of principal crops had profit margins hovering between 20-30%. But the reality of first two years turned out to be nightmarish for farmers, with profits plunging to less than 5% in most crops.
One after the other, farmer groups, who were great supporters of Modi government have been feeling disillusioned and deserting. Even BJP party workers with some concern for the farming community whisper their frustration in private with the agenda of their own government, as they know this is more elitist, which will accentuate inequality at the cost of simmering discontent in rural areas, costing them heavy, politically.
Can the PM and FM show some bold moves in the forthcoming Budget to put agriculture back on track of 4% growth? I have serious doubts, as the agenda is already hijacked by the elites who want writing off bank loans of lakhs of crores of rupees for Big Business while the honest and hard-working farmers look up with hopeful eyes.
The author is Infosys chair professor for agriculture at ICRIER