Raising the rate of growth of farmers’ incomes from 3.6% to almost 13% by 2022-23 is akin to promising them the moon and taking them for a ride
It is the season of promising freebies to lure voters. Congress leads in these promises. It has promised a loan waiver in Chhattisgarh within 10 days of coming to power; and the hiking of minimum support price (MSP) of paddy to Rs 2,500/quintal, up from Rs 1,750/quintal, a 43% raise over the already increased MSP of paddy. In Madhya Pradesh, it has promised a loan waiver of up to Rs 2 lakh, MSPs as per MS Swaminathan formula cost C2 + 50%; a pension of Rs 1,000/per month to marginal farmers above the age of 60 years, and Rs 51,000 for the marriage of daughters of small holders. And so on. It is clear that when a political party is out of power, it can promise the moon, but when it comes to power, it muddles and delays in fulfilling its own promise as they are often not in sync with budget realities or any rational long-term vision for the farm sector.
BJP was no better. It promised to waive farmers’ loans in Uttar Pradesh when it was not in power. In fact, it was the prime minister himself who promised to do this in the very first meeting of the UP Cabinet, if they were voted to power. And this seemed to have worked. Congress seems to have learnt these tricks and is now promising loan waivers in almost all major states it is fighting elections. And if these trends are any indications for the things to come, the Parliamentary elections will have promises of farm loan waivers in all remaining states, and further hikes in MSPs, and may be some provision for pensions for aged farmers. All this may easily cost the exchequer anything between Rs 2 to Rs 3 lakh crore. Congress often asserts if the NDA government can ‘waive off’ Rs 2 lakh crore for a few industrialists in the name of ‘restructuring their NPAs’, what is the harm in waiving off farm loans of millions of farmers.
The moot question that arises is: Will these freebies put Indian agriculture on a sustainable high growth path that augments farmers’ incomes? The simple answer is no. In fact, they may worsen the condition of agriculturists over the medium- to long-run. These band-aid solutions will eat into the scarce resources of the sector, shrinking public investments in agriculture, and lowering the growth of this sector. Even worse is that such promises of freebies take away the focus from structural reforms that are urgently needed in agriculture. The prime minister’s promise to double farmers’ real incomes by 2022-23 cannot be realised with loan waivers and higher MSPs. Even the current MSPs of kharif crops that have been announced on the formula of 50% margin over cost A2+FL does not give much comfort to farmers as the market prices of most of the kharif crops are reeling way below (10%-40%) their announced MSPs. So, promising even higher MSPs for these crops is either befooling farmers or rubbing salt on their wounds!
Why our Election Commission remains a moot spectator to such unrealistic, irrational, and irresponsible promises made in parties’ election manifestoes remains an open question that needs national wide discussion. What Indian agriculture and its peasants need from political parties is the promise to usher in structural reforms, stretching from ‘getting the agri-markets right’ for getting remunerative market prices for their produce, to ensuring that our farmers have access to best technologies from ICAR system or CGIAR system or even the best private sector companies, local or global. This would require augmenting investments in agri-R&D, and fixing the weak intellectual property rights (IPR) regime.
It further needs massive investments in water management, fertiliser use management, organic culture and also the spread of bio-technologies, including GM technologies. These have to be coupled with institutional reforms in land management by freeing up land lease markets, reforms in agri-credit markets by increasing the reach of institutional credit to small and marginal farmers rather than giving heavy interest subvention (MP gives agri-credit at zero interest rate while the informal sector charges rates that range above 24% per annum!). Streamlining crop-insurance (Pradhan Mantri Fasal Bima Yojana) and e-NAM would take time, and need lot of perseverance with focus. The Essential Commodities Act needs to be drastically pruned and reformed. Export and domestic marketing policies need to be liberalised.
Unfortunately, the time horizon of our political parties is very short and they are myopic in their election manifestoes. They cannot wait for their investments to bear fruit, which can take anywhere from 3 to 5 years, if not more. So, freebies galore and investments take a back seat, and structural reforms are not even mentioned! The result is clear: Our agriculture keeps chugging along, and so is the income of farmers. From 2002-03 to 2015-16, based on NSSO and NABARD surveys, farmers’ real incomes have increased by only 3.6% per annum.
Doubling farmers’ real incomes by 2022-23 over a base of 2015-16 requires a growth rate of 10.4% per annum. More than two years have already passed, and so far the growth rate has been below 4%. In the remaining years till 2022-23, for farmers’ incomes to double, the required growth rate is about 13% per annum. Raising it from 3.6% to almost 13% per annum seems akin to promising an overall GDP growth from current level of say 7.4% to about 20% per annum for the next five years! Is it not promising the moon and taking voters for a ride?
-The author is Infosys chair professor for agriculture at ICRIER