Farm distress: Why PM Narendra Modi should focus more on rural economy

Updated: November 30, 2018 4:32 PM

With less than six months to go for the general elections, Prime Minister Narendra Modi is faced with farmers' protests. More than a lakh farmers have gathered in Delhi demanding a special session of Parliament to discuss their problems.

Narendra Modi, Narendra Modi capinet, Union Cabinet, agriculture export,agriculture export policy, economy newsAgriculture accounts for only 15.4% of the GDP, more than half of India’s population is dependent on agriculture for livelihood. (Reuters File Photo)

Krishnanand Tripathi

Prime Minister Narendra Modi should be a worried man. With less than six months to go for the general elections, he is faced with farmers’ protests in various parts of the country. More than a lakh farmers have gathered in Delhi demanding a special session of Parliament to discuss their problems including an increase in minimum support price and a farm loan waiver to tackle indebtedness in rural areas. Due to low income and increasing cost of agriculture, farmers have been pushed to the brink and they have resorted to protests.

Rural distress was an important election issue in the recently conducted elections for Madhya Pradesh, India’s second largest state in terms of area. And it was partly blamed for the less than expected performance of the BJP in Prime Minister’s home state Gujarat in last years assembly elections.

Reasons for rural distress

Although agriculture accounts for only 15.4% of the GDP, more than half of India’s population is dependent on agriculture for livelihood. It means that more than half of India’s population or nearly 65 crore people are competing for little over 15% the country’s income.

India’s development model has historically been loaded against farmers, pushing them into subsistence farming. Lack of health and educational infrastructure in rural areas leaves rural youth unprepared for the job market.

Another serious problem with Indian agriculture is the lack of adequate irrigation infrastructure, making farmers largely dependent on the south-west monsoon and failure of monsoon results in failure of farming, leading to mass suicides of farmers.

Other than the vagaries of weather, Indian farmers have historically been dependent on informal private money lenders to meet their short-term fund requirements. Failure of monsoon or failure of crop due to any other reason like floods or insects have often led to the suicides of farmers in a region.

Also read: Farmers protest in Delhi LIVE Updates: Rahul Gandhi addresses the rally, says empty speeches are being given

Unviable agriculture sector

Indian farming is so unattractive that even in the case of rural households, agriculture was not the main source of family’s income in case of more than three fourth of the households as per a survey conducted by the NABARD, the main public sector bank catering to the country’s rural sector.

As per the NABARD survey, out of total around 21.17 crore rural households, nearly half of which, or around 10 crore households, were defined as agricultural households that were primarily engaged in farming and livestock raising, even in their case agricultural activities accounted for just 43% of their incomes.

According to the survey, the average net monthly income of Indian rural households after deducting the input cost was just Rs. 8,059. The biggest share, nearly 43% of this income, Rs 3,504 was coming from wage labour which includes both farm and non farm labour.

The second biggest source of income was either a government or private job which accounted for Rs. 1906 or nearly 24% of the family’s income and the income from farming and livestock raising accounted for just 23% or little over Rs. 1800 per month.

Supporting agriculture is very important for any government as despite their meager finances rural households have emerged as significant consumers due to their large base. Rural households account for bulk of two-wheelers and basic white goods sale.

Just this week, India’s largest lender SBI has downgraded the GDP growth forecast for July-September to 7.5-7.6% due to weak rural demand in a report.

A wake-up call

Rural distress will be an important election issue in the upcoming general elections that will take place early next year as farmers have demanded farm loan waivers in almost every major state election in the last two years, including India’s most populous state Uttar Pradesh. Nearly 14% members of the Lok Sabha are elected from Uttar Pradesh and the state accounted for more than 25% of total seats won by BJP in 2014, giving a clear majority to any party after 30 years.

This makes it critical for the prime minister to address agrarian distress on priority to win a second term. One can expect a slew of measures to address the rural crisis, despite the burden they could have on the government’s finances.

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