If India achieves a 4-5% growth in agri-GDP on a sustainable basis, it would need to export aggressively lest it creates a glut at home, adversely affecting farmers’ incomes.
By Ashok Gulati & Ritika Juneja
The festival of democracy started with the first phase of polling on April 11, 2019. Ideally, it should be celebrated like Holi, forgetting past enmity and embracing each other with love. But, unfortunately, it is being fought like a battle of Kurukshetra in the Mahabharata epic. All weapons of politics—saam, daam, dand, bhed—are being used. Saam reaches for accord with other parties, daam uses money power to buy votes, dand uses CBI to raid camps of opponents, and bhed divides voters on caste/ religious lines. Voters are in a quandary as political parties are promising the moon in their manifestoes. Voters know most of these promises will be forgotten once the elections are over. Yet, one must look at these, since they reflect the best of their intentions. We examine some of these with respect to farmers and the poor, normally agri-labourers. Given that the full list is like a laundry list, we focus only on the big ticket promises.
BJP’s Sankalp Patra (manifesto) promises to double farmers’ income by 2022-23, a reiteration of its promise made in 2016. Under that heading, it lists 29 promises/schemes. The most notable one is the PM Kisan (Pradhan Mantri Kisan Samman Nidhi Yojana), which will be extended to all farm families. It promises to give each farm family Rs 6,000 per year. With an estimated 14.6 crore farm families as per the 2015-16 survey, this would cost about Rs 87,600 crore per annum. This may be the largest direct income support (DIS) scheme by the government of India (GoI). But, as the NABARD survey on financial inclusion showed, average farmer household income was Rs 8,931 per month in 2015-16, which by now must have crossed Rs 10,000 per month (or Rs 120,000 per annum) in nominal terms, after adjusting for inflation. So, a support of Rs 6,000 per year is a meagre 5% support. Doubling of farmers’ income surely requires much more than this DIS.
The Dalwai Committee set up by the Modi government in 2016 had made it clear that the promise to double farmers’ income was made in real terms with the base year of 2015-16. It calculated that it would need 10.4% growth per annum in real terms from 2016-17 to 2022-23 to double farmers’ real incomes. The past record of growth in real incomes of farmers during 2002-03 to 2015-16 shows that they increased at 3.7% per annum, and this growth follows the growth in agri-GDP very closely. Modi’s government’s five-year record of agri-GDP is pretty low at 2.9% per annum. This means that for the remaining 4 years, the growth in farmers’ real incomes has to be almost 15% per annum. This is next to impossible given the existing set of policies. No wonder the Congress party calls it a Modi government’s jumla.
We feel that if India achieves a 4-5% growth in agri-GDP on a sustainable basis, it would need to export aggressively lest it creates a glut at home which will then adversely impact farmers’ incomes. But the Modi government’s record on agri-exports is most pathetic. From a peak of about $43 billion in agri-exports in 2013-14 that it inherited from UPA-2, till date, its exports have remained below that peak, meaning a negative growth through the five years of the Modi government. This is one major reason behind farm distress.
What one was expecting from the main political parties was bold promises to reform agri-markets. But the BJP manifesto is quite silent on this. In that sense, the Congress manifesto scores better by explicitly promising to reform the Essential Commodities Act, repealing APMC, freeing up exports, etc. How they will do it is yet to be seen, but at least the thinking and its intent is in the right direction. Also, Congress promises Rs 72,000 per year to the bottom 20% of families under its NYAY (Nyuntam Aay Yojana) scheme, which may include many small and marginal farmers, tenants, and agri-labourers. It is likely to cost the fisc Rs 3.6 lakh crore, almost four times what PM-Kisan of BJP will cost. Obviously, everyone is asking where this money will come from. That is not spelt out in the manifesto. But since the Congress manifesto also gives a time frame under which it will be implemented, it seems serious about it.
In both cases, it is clear that India is on the road to a major shift in policy towards direct income support (DIS), triggered by Telangana’s Rythu Bandhu and followed by Odisha’s KALIA. This move towards DIS can be a tectonic shift in policy if it subsumes at least the food and fertiliser subsidies and, if possible, the power subsidies at state level. Currently, the food subsidy is Rs 1.84 lakh crore with pending bills of FCI at Rs 1.3 lakh crore as on April 1, 2019. Fertiliser subsidy is Rs 75,000 crore with pending bills of about Rs 30,000 crore. If all these are merged and given as DIS to identified beneficiaries, that would be the wisest move by whichever party comes to power. Incidentally, much of this was recommended to the Modi government way back in 2015 by the Shanta Kumar panel report, a high powered committee set up by the Modi government itself. Maybe it is time to pick it up and implement it.
There are many other promises. BJP, for example, promises zero-interest loans to farmers of up to Rs 1 lakh. The trouble with such schemes is that they lead to a massive diversion of agri-loans to non-agri-purposes. Modi government had made a big move in revamping crop insurance in 2016, but its rollout suffered several teething problems. The test of the existing scheme would be a drought year, but making it voluntary now may shrink its coverage. Then there is a promise of investing massive amounts in agriculture (Rs 25 lakh crore) without much details. Such promises remain vague and meaningless. But who cares, it is time to see the dance of democracy!
(Gulati is Infosys chair professor for agriculture and Juneja is consultant at ICRIER)