The present political comedy in Punjab wherein Manpreet Singh Badal, the state finance minister, is being projected as a threat to his far more popular cousin Sukhbir Singh Badal, needs some unpacking. Manpreet drew the ire of his party for suggesting that a Rs 35,000 crore debt-waiver was on offer from the Centre if Punjab rationalised its regime of subsidies and improved tax collection.
Manpreet seemingly attracted the ire of his party for harping upon a widely known idea that a subsidy-driven model of economic growth can take you only this far and no further. The attack on him first came from supporters of the Badal clan. Later, Sukhbir joined in and it began to assume the shape of a power tussle between the cousins.
Even while growing at a sluggish 6.89% per annum for the past five years or more, the economy of Punjab has been visited by considerable change. Its more visible signs can be seen in the emergence of two international airports in the state, the upgrading of the road network through toll tax collection, the availability of one of the better communication networks in the country and the expansion of facilities of higher education, especially technical education. For a poorly industrialised state, these are significant. With 105 km of pucca road per 100 sq km Punjab is way ahead of the national average of 43 km. It also has a healthy per capita power consumption of 1,437 kwh.
Today the Punjab economy is substantially different from what it was 10 years ago. To be sure, the state remains the granary of India. Almost 98% of its arable land is being cultivated, most of it intensively. It produces enough foodgrain to feed the country and more each year. But it is the tertiary sector that is now dominating the economy of the state.
Estimates of the size of the economy released for the year 2008-09 by the state government suggest that the tertiary sector amounted to over Rs 73,000 crore, the primary sector lagged behind at Rs 55,000 crore while the secondary sector was at a meagre Rs 37,000 crore.
The simple point has been that in Punjab, as in other developed parts of the country, agriculture is declining in importance and the tertiary sector, comprising of trade, hotels and restaurants, transportation and communication, banking, real estate etc. has begun to dominate the economy. Not only that, even in its hopes for the future, it is towards the service sector that the government thinks growth should be directed. In the Eleventh Plan period it set up a target of 8% growth in the service sector, 7.4% in industry but only 2.4% in agriculture.
The Badal clan, with its extensive investments in agri-business, hospitality, transport and health industries, is actually well-entrenched in the new economy.
However, its support base among the Jat farmers has not yet adjusted to this new reality. For them, at least in emotive terms, subsidies on electricity, water and other agricultural inputs seem to still be the most important ways of milking the state for their own benefit. These subsidy figures, especially the ones pertaining to subsidised power, have been mentioned frequently as creating major losses for the state.
One also needs to take into account the fact that even the efforts at modernising agriculture have yielded meagre results and have only created greater disparities among farmers. Various studies have shown that the efforts by the state to modernise agriculture through contract farming and extensive subsidies had benefited only the farmers with more than 10 acres of land.
In a situation where almost 70% of agrarian effort goes towards the production of rice and wheat, the foodgrain producer looks forward to a better minimum support price from the government rather than greater efficiencies in agri-marketing and agri-business. Then there is the complete absence of political will to rein in the arhatiya, the agri-middleman, in Punjab. Some 20,000 arhatiyas of Punjab earn a 2.5% commission on the purchase of grain, for doing nothing. The main income for these middlemen comes from money-lending. A study by the Panjab Agriculture University shows that on an average, each arhatiya gives out a loan of Rs 67 lakh per annum. These loans are in a sense guaranteed by the government since all official payments to farmers in Punjab are routed through the arhatiya who then has the first call on the income of the farmer. It is little wonder that many of the large farmers in Punjab, since colonial times, have supplemented their farm incomes by giving out loans to their lesser brethren.
It is this class of people who felt threatened by the proposed changes in the economic policies of the state. Manpreet Singh Badal has become the victim of the old guard trying to postpone the inevitable withdrawal of its goodies. That this may not have been the intention of Manpreet only completes the irony.
M Rajivlochan is professor of Contemporary Indian History, Panjab University, Chandigarh, and author of ?Farmers Suicide, facts and possible policy interventions? and ?Jal Swaraj?