The govt should carry out immediate reforms in agriculture, or the sector will become its Achilles heel
The Modi sarkar is up for evaluation by everyone. How much it has worked on the promises made to the masses, and how far it has put the economy on a sustainable growth path, are the key questions being asked, at the completion of its first year. Everyone has his/her own take, and here is mine.
Last year, when election campaign was at its peak, the headlines about the UPA that dominated news coverage related to scams, high inflation, policy paralysis, etc, all of which were hitting India’s image hard internationally. All of that seems to have waned or disappeared. In this regard, one can count at least 5 major hits of the Modi sarkar in its first year.
* Prime minister Modi’s biggest success, in my humble opinion, is getting India to count again in the global reckoning. He got busy early, sowing India-seeds in all major global powers, be it USA, Japan, China, France or Germany. In our neighborhood, too—from Bhutan and Nepal to Sri Lanka—he has brought India new-found respectability. He is traveling relentlessly, inviting businesses to “make in India” while the government has significantly eased visa formalities. Hopefully, these seeds of friendship and investment prospects will sprout soon, and Modi can harvest a rich crop in the ensuing years. Opposition will, however, term it as a mere PR exercise undertaken by the PM.
* So far one has not heard of any scams at the ministerial level in Lutyens Delhi. There can be, and have been, some goof-ups in policy; but no one has blamed these on corrupt intentions. The way coal and spectrum auctions have been handled has brought back reasonable transparency to the system and will also help improve the government’s fiscal health.
* Policy paralysis, too, is becoming a thing of the past. The several bills presented in Parliament are a testimony to this. In fact, Parliament, in terms of debating and clearing bills, has been more productive than it was in the last few years!
* Inflation in general, and food inflation in particular, has been brought under control, partly by policy action and partly through luck (globally, commodity prices have come down). Although there is still scope to bring inflation down further, the inflation figure has given the Modi government time to breathe and plan a long-term strategy to tame prices.
* On the social sector front, the high priority with which financial inclusion was taken up, that led to the unprecedented success of the Jan Dhan Yojana, is commendable. It can be a game-changer if it is combined with Aadhaar-based authentication and payments through mobile—together called Jan Dhan-Aadhaar-Mobile, or JAM—and most of the subsidies are directly transferred to the accounts of beneficiaries, as has been already done in the case of gas subsidy. Three recently-launched schemes—the Pradhan Mantri Suraksha Bima Yojana, the Pradhan Mantri Jeevan Jyoti Bima Yojana and the Atal Pension Yojana—can be a major leap in strengthening social security for the masses in the unorganised sector.
Of course, there would be many other hits, especially in social and political mobilisation, like that for the Swachh Bharat Abhiyan or the 10-crore membership drive of the BJP, etc, but let us focus on the economy here.
What is the Modi government’s biggest miss? It is agriculture and the increasing farm distress. Two seasons have already turned out bad, and if the third, too, also gets out of gear, the Modi sarkar may be in for trouble, with the sector turning into its Achilles heel. Raising insurance compensation without getting the insurance system on a strong footing is not going to help much, nor would the soil health cards, if the current system of subsidies is not rationalised.
While prime minister Modi made significant strides in China last week, striking 26 business deals worth $22 billion, none of these was related to agriculture. However, the biggest lesson that the Modi sarkar could take from China is in agriculture: China produced more than 600 million tonnes (mt) of food-grains, compared to India’s 251 mt, in FY15, from a total cropped area that is less than India’s, and with the average holding size being almost half of India’s (1.15 ha).
Moreover, it is important for Indian policy-makers to know that China started off its economic reforms with agriculture, not industry. During 1978-84, which marks the beginning of China’s economic reforms, China abandoned the commune system and graduated to household responsibility system in land. This is well-known, but what is not known as widely is that China also liberated controls on agriculture pricing to a large extent. As a result, China’s agriculture grew by 7.1% per annum (pa), while farm incomes increased by 14% pa and rural poverty halved in just six years, between 1978 and 1984.
It is this ‘firing from the bottom’ (starting with agriculture) that gave political legitimacy to the economic reforms China later embarked on, as it benefitted the largest number of people. This unprecedented rise in rural incomes also created huge demand for simple industrial products ranging from televisions, toys, refrigerators, etc (FMCG). And this opportunity was grabbed by town and village enterprises (TVEs), which led to China’s manufacturing revolution.
The rest, as they say, is history.
India’s reforms started with stealth, and started from the top, correcting exchange rates, industrial licensing, etc. It benefitted the better-off ones more. Poverty halved but it took 18 years (1993-2011)—compared to China’s six—as India had to rely on a trickle-down effect.
Investment in agriculture, especially irrigation, agri-R&D, and a common all-India market, is critical. It has high pay-offs, both politically and economically. Remember, the three BJP chief ministers who came back to power thrice in a row (Gujarat, Madhya Pradesh and Chhattisgarh) are all whose states saw agri-GDP growing at more than 7% pa over a decade (FY02 to FY12). And this, nobody knows better than prime minister Modi himself as he has harvested his biggest political crop from this. Would he now focus on this weakest link, and make sure that India growth story is put on sustainable trajectory?
The author is Infosys chair professor for agriculture at ICRIER. Views are personal