Budget 2018: Indian farms produced record harvests in 2017, and the government's agricultural budget rose 111 per cent over four years to 2017-18. Yet, prices crashed, 8,007 farmers committed suicide in 2015, unpaid agricultural loans rose 20 per cent between 2016 and 2017, and the 600 million who depend on agriculture are struggling to get by.
Budget 2018: Indian farms produced record harvests in 2017, and the government’s agricultural budget rose 111 per cent over four years to 2017-18. Yet, prices crashed, 8,007 farmers committed suicide in 2015, unpaid agricultural loans rose 20 per cent between 2016 and 2017, and the 600 million who depend on agriculture are struggling to get by. This is the situation that faces the Bharatiya Janata Party (BJP) government as it heads into its last full budget 2018 before general elections in 2019, at a time when Prime Minister Narendra Modi has promised a doubling of farm incomes by 2022. Agriculture is the government’s “top priority”, Finance Minister Arun Jaitley said on January 15, admitting that “farmers were not getting the right price for their produce”. That is an acknowledgment that record harvests and government spending are not significantly resolving the agricultural crisis.
India harvested a record 276 million tonnes — all-time highs were reported for rice, wheat, pulses, tur (pigeon pea), urad (black gram) and coarse cereals — 4.01 per cent higher than the previous record in 2013-14, according to the fourth advance estimates for the rabi (winter) and kharif (monsoon) crops for 2016-17. Similarly, horticulture output was nearly 300 million tonnes, or 4.8 per cent more than 2015-16, with potatoes — now experiencing a glut, leading to unrest among potato farmers in Uttar Pradesh — recording a 11 per cent increase over the previous year.
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Over a decade ending 2014-15, India’s agriculture sector grew at four per cent per annum compared to 2.6 per cent per annum the previous decade, according to the 2017 Dalwai Committee report that explored how farm incomes could be doubled. An indicator of growing problems in India’s agricultural economy is a drop in the growth of gross value added (GVA) — a measure of income to farmers before their produce is sold — to 2.1 per cent in 2017-18 from 4.9 per cent the previous year, according to the first advance estimates of national income 2017-18.
The slowdown could be witnessed in agricultural exports, which dipped to Rs 2.1 lakh crore, after growing more than five times over a decade ending 2014, while agricultural imports grew five times over the decade to 2015-16. An agricultural slowdown has evident political implications: 49 per cent of landowning farmers voted for the BJP in 2014. A reminder came in December from Gujarat, where the BJP won by the narrowest margin in 22 years, winning fewer rural seats (43) than the Congress (62). Further evidence of farm distress is evident in rising agricultural loan defaults, loan waivers by state governments and farm suicides. Alongside record foodgrain and horticultural output in 2016-17, many states were swept by farm agitations demanding higher prices for their produce and farm-loan waivers.
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One example is tur dal. After the monsoon of 2017, imports and a record harvest caused a glut that led to a fall in minimum support price (MSP), leading to unrest and stress in rural Karnataka, Maharashtra, Telangana, and Gujarat. A similar glut in potatoes crashed prices in Uttar Pradesh, prompting farmers to dump produce on roads statewide. Such situations spur agrarian unrest. There has been an almost eight-fold increase in agrarian riots between 2014 and 2016. In July 2017, five farmers were killed in police firing during a protest seeking farm-loan waivers and higher produce prices. And as distress grew, so did farmer suicides, which increased 42 per cent in 2015 over the previous year.
Nearly four in 10 of 8,007 Indian farmers who committed suicide in 2015 were in debt, compared to two in 10 in 2014; more rural households went into debt over 11 years; and the average rural household had borrowed Rs 1.03 lakh, according to an analysis of government data. In 2017, with farmers in eight states demanding loan waivers, India’s potential cumulative loan waiver was Rs 3.1 lakh crore ($49.1 billion), or 2.6 per cent of GDP in 2016-17, almost equal to the defence budget of Rs 3.6 lakh crore ($53.5 billion).
The loan write-offs caused non-performing assets (NPA) related to agriculture to increase three-fold over three years to 2012-13, according to a 2017 report commissioned by the government. A major reason for persistent farm distress and the debt-and-death cycle is that 52 per cent of farms depend on increasingly erratic monsoon rains. Although 2017 was classified as a “normal” monsoon, eight states were declared drought-affected, revealing the vulnerability of farms to uncertain rainfall in an era of climate change. Despite spending Rs 3.51 lakh crore — equivalent to the farm-loan waivers demanded in 2017 — over 67 years, no more than 48 per cent of nearly 201 million hectares of farmland is irrigated.
The government intended to invest about Rs 50,000 crore over five years to 2019-20 through the Pradhan Mantri Krishi Sinchai Yojana — the Prime Minister’s Irrigation Programme — to reach its target of water for every farm. But the programme was modified to revive 99 moribund small and medium irrigation projects in 2016-17. There is a need to ensure that farm production is linked to various markets for farmers to recover full value of the quantity produced. This will incentivise the farmer to adopt improved technology and management practices for higher productivity, according to the Dalwai Committee report. This requires better storage and warehousing facilities.
About 60,000 tonnes of foodgrain was wasted between 2011-16 in warehouses run by the state-owned Food Corporation of India. This means the grain either rots or is eaten by rodents and other animals. India’s cold-storage capacity for fruits and vegetables increased by eight per cent to 346 lakh metric tonnes over three years to 2017. This should allow farmers to reduce time to market and ensure better quality. In the upcoming budget 2018, agriculture is on the government top list.