Rather tHan MSP, for better prices getting the markets right by overhauling the agri-marketing infrastructure and associated laws presents a better solution.
With the BJP-led NDA government recently having completed four years in office, there is a major media campaign, claiming “48 months of transforming India”. Several infographics and tweets by the government show happy farmers whose lives have been transformed in these 48 months. Cut to news channels telecasting live visuals of farmers protesting in the 10-day bandh, cutting off supplies of essential commodities like milk and vegetables to urban areas. The idea is to attract government attention to their myriad woes, especially low agri-prices.
So, whom should one believe? Saaf niyat of the government and its sahi vikas claims, or the desperate farmers dumping their produce on roads? The Union agriculture minister termed the farmers’ strike as mere drama to catch media attention. It may be. But a few facts about the performance of agriculture during the last 48 months can throw better light for readers to judge why farmers are agitating today.
In the 48-months of the Narendra Modi government, the Indian economy (GDP) grew at an average rate of about 7.2%, but its agriculture sector (agri-GDP) grew at a mere 2.5% per annum (Source: CSO May 31,2018). Interestingly, in the last four years of UPA II government (2010-11 to 2013-14), the economy clocked a growth rate of 7.1% per annum and agri-GDP grew at 5.2% per annum (see graphic).
Investments in agriculture (gross capital formation in agriculture or GCFA) as percent of agri-GDP, fell from 17.7% in 2013-14 to 15.5% in 2016-17. Agri-exports fell from $42.4 billion in 2013-14 to $32 billion 2015-16, recovering to $38 billion 2017-18, while agri-imports escalated from $16 billion in 2013-14 to $24 billion in 2017-18, which nearly halved the agri-trade surplus from $26 billion in 2013-14 to $14 billion in 2017-18.
Also, compared to 2013-14, profitability in most of the major crops is down by at least one-third in 2017-18. In view of all this, it should not surprise readers if annual growth rate of 3.6% achieved in farmers’ real incomes between 2002-03 and 2012-13 has fallen to about 2.5% in the last 48 months.
Overall, therefore, the data clearly shows that all is not well on the agri-front since 2013-14. The sector and its peasantry, instead of flourishing is, at best, trudging along. It is this below-normal performance that has manifested in the farmers’ protests. Their basic demands are: deliver on the promise of “50% profitability over costs”, a promise the BJP made to farmers in its 2014 election manifesto; and give a complete loan-waiver.
The promise of remunerative prices was based on the 2006 MS Swaminathan Committee Report that recommended fixing MSP at cost-plus 50%. In his presentation on October4, 2006, Swaminathan made it clear to Union minister of agriculture that the cost being discussed was Cost C2, which is comprehensive cost, i.e., sum of paid-out costs, and imputed values of family labour, rentals on owned land and interest on owned capital. Sum of paid-out costs and the imputed cost of family labour is A2+FL cost, which is about 38% lower than C2 cost.
After nearly four years in power, PM Modi has now announced his intent to give farmers MSPs that are at least 50% above cost (A2+FL and not C2). What actually happens is yet to be seen. Unfulfilled promises and falling profitability, particularly in case of cotton, maize, groundnut, soyabean, jowar, bajra, rape and mustard seed, and even sugarcane where margins (MSP over A2+FL) in 2017-18 are lower than margins received in 2013-14, have left farmers worse-off. Now, even if MSPs for kharif crops in 2018-19 witness a hefty increase, given the limited reach of the government’s procurement mechanism, benefits are likely to go to limited peasants in selected states.
An efficient and sustainable solution for better prices really lies in “getting the markets right” by overhauling the agri-marketing infrastructure and its associated laws. It needs to be done on priority, in a synchronised manner. As agriculture is a state-subject, having NDA governments in 22 states presents PM Modi a unique golden opportunity to carry out these long-due marketing reforms in the sector. Unfortunately, that opportunity seems to be slipping fast as we don’t see any champion in the government to get it implemented in its true spirit before the next parliamentary election in 2019.
What might happen, instead, is a spate of farm loan-waivers—first, state by state, wherever elections are due, followed by all remaining states by 2019. The total bill of farm loan-waivers, from 2017 till 2019, we are afraid, may touch Rs 300,000 crore. Such ‘band-aid’ solution of loan-waivers may give some temporary relief to some farmers, but will not resurrect agriculture, and the woes of Indian peasantry will continue. Attaining a 4%-plus growth in agri-GDP on a sustainable basis remains a challenge. And with agriculture just trudging along, the dream of doubling farmers’ real incomes by 2022-23—as PM Modi has envisioned—sadly, may remain merely a pipe-dream.
The key lessons of the four years of performance in agriculture, which engages the largest proportion of the workforce (47%), should be, first, having the humility to accept that agriculture is not doing very well. The focus must be on effective and timely implementation of various commendable programs that Modi government initiated, be it the PM’s Fasal Bima Yojana or PM’s Krishi Sinchayee Yojana, or creation of National Agriculture Market. This requires hard work, fixing various nuts and bolts before these schemes can deliver. Can it be done in the remaining months before 2019 general elections? Only time will tell.
(Note: This is the fourth and final article in a series of four articles written on the theme of assessing Modi government’s performance in the last four years in agri-food space. The earlier three articles can be accessed at goo.gl/DmpLnf, goo.gl/wBhBzz, and goo.gl/6pXnks. These articles evaluated performance of Modi government in food policy, against the promise to transform Food Corporation of India (FCI), its crop insurance scheme, and agri-marketing reforms.)
Ashok Gulati & Shweta Saini Gulati is Infosys Chair professor for agriculture, and Saini is senior consultant, ICRIER