Finance Minister Piyush Goyal in his Budget speech announced a direct income support of Rs 6,000 per year for small farmers owning less than 2 hectares of land, which is certainly meagre by any standards, but is a tectonic shift in economic thinking around the role of agriculture for development. It entails a paradigm shift from the existing ‘price policy’ to move towards ‘income policy’ unlocking the immense growth potential existing in agriculture.
The announcement of a direct income package of Rs 6,000 for 12-crore small farmers, which actually boils down to Rs 500 per month to be paid in three instalments, is certainly too meagre by any standards. Although the Finance Minister has made a budgetary provision of Rs 20,000-crore for the remaining period of the fiscal to enable the first instalment of Rs 2,000 to be credited in the bank accounts of beneficiary farmers before the forthcoming general elections, the petty amount has evoked sharp reaction from the distressed farming community. And rightly so.
I don’t know how a direct income support of Rs 500 per month per small farming household will be able to pull out 12-crore small and marginal famers from the terrible agrarian crisis that prevails. Nor do I understand how this meagre support will help in reducing the spate of farm suicides. There is hardly a day when farm suicides are not being reported from one part of the country or another. Take the case of Punjab, where even after the loan waiver of Rs 2-lakh per farmer was initiated in January 2018, as per Bhartiya Kisan Union calculations there have been 430 farm suicides reported in the year gone by. Therefore the question that needs to be asked is how did the policy makers conceive of the idea to provide a paltry direct support which will not even make an iota of a difference.
Considering that the average income worked out by Nabard All India Rural Financial Inclusion Survey 2016-17 stands at a paltry Rs 8,931 per month, it is quite certain that the direct income support of Rs 500 per month will not be enough in achieving the objective of doubling the farm income. Nor is this amount fit enough for any significant farm investments the farmer would like to make. Economic Survey 2016 had earlier computed the average income of a farmer in 17 States, which means roughly half the country, at a pitiful Rs 20,000 a year. In other words, the average income of farming family in half the country stood at less than Rs 1,700 per month. I shudder to think how several million farmers survive in that miserly income.
Since the government has already made an annual budgetary provision of Rs 75,000-crore for PM-Kisan (beginning with the full-fledged budget expected after elections) there is no reason why the direct payment amount couldn’t have been double. At Rs 12,000 per small farmer, the budget allocation would have certainly doubled, which means a hike in budgetary allocation to Rs 1.5-lakh crore. To the question where will the money come from, the best and easy instrument available for the Finance Minister was to immediately scrap the annual fiscal stimulus package of Rs 1.86-lakh crore being doled out to the industry, in operation since the global economic meltdown in 2008-09. While there is no economic justification for the package, it continues to be paid for ten years now. In simple words, Rs 18.60 lakh crore has been paid to the industry since 2008-09 and no question has ever been raised about the fiscal imbalance accruing. I see no reason why this money couldn’t have been transferred to farmers account.
Like in Telangana’s Rythu Bandhu scheme, the Centre too has kept the direct income support limited to land owning farmers. The only difference being that while the Rythu Bandhu scheme is open ended, which means even if a farmers has ten acres of land he will get a proportionate support, the Centre is restricting it to farmers owning less than 2 hectares. It however excludes tenant farmers, who form nearly 40 to 50 per cent of the farming population, from getting the same benefits. At the same time, direct cash payments landing in the bank accounts of absentee landlords remains a big problem.
Nevertheless, as someone who has been a strong advocate for direct income support, it is gratifying to see direct payments now becoming an economic necessity. Agriculture has been and still remains a victim of the tyranny of markets. For more than four decades now, agriculture incomes had remained static with many studies providing an empirical evidence of declining real farm incomes. I have always maintained that agriculture has been deliberately kept impoverished to keep the economic reforms alive. Keeping the food inflation low and by ensuring a cheaper raw material for the industry, the entire economic burden has been quietly passed on to farmers.
An economic model, where agriculture is treated with disdain and has been very cleverly projected as an uneconomic activity, has to be reversed. To say that the Rs 500 a month cash dole to small farmers may be increased in the future as the government's resources grow is a reflection of the same faulty economic thinking. As a result most economic resources have been slowly and steadily shifted to the industry. Since 2004-05, the industry has got Rs 55-lakh crores of tax concessions. Niti Aayog estimates these concessions to be 5 per cent of GDP. Knowing that income saved is income earned, this in reality is no less than direct income support. In addition, the industry has been provided with massive incentives, which in reality are subsidies. On the other hand, an OECD-ICRIER study has worked out a total loss of Rs 45-lakh crores in the period 2000 and 2017 on account of low farm prices.
If only the farmers were paid their legitimate dues, the face of agriculture would have been much bright. In addition, I fail to understand why governments have refused to take steps for ease of dong farming. Agriculture alone has the potential to reboot the economy, and can sustain millions of livelihoods thereby reducing the pressure on job creation.
Providing direct cash payments to small and vulnerable groups is the first step in augmenting farm incomes. I am sure with the passage of time direct cash amount will see an incremental increase. This has to be simultaneously followed with the setting up of a Farmers Income Commission, with a mandate to ensure a minimum monthly income of Rs 18,000 per farming family per month. This will open the doors to agriculture receiving more public sector investments, more holistic reforms, and in bargain being turned into an economic activity. #
Farmers need much more than cash dole. The Tribune. Feb 6, 2019
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