Terming the economic slowdown as unprecedented and perhaps the worst in the past 70 years, the Niti Aayog Vice Chairman Rajiv Kumar had called for extraordinary steps to fuel the economy. But strangely I did not find the Niti Aayog raise any alarm bells when it became known that Indian farmers suffered a back-breaking loss of Rs 45-lakh crores in the 17 years period, between the years 2000 and 2017.
The unprecedented crisis in agriculture, which was evidently passing through its worst phase in the past 70 years, did not evoke any response from the mainline economists as well as the policy makers. Not only the OECD-ICRIER study that pointed to the denial of rightful income to farmers and thereby leading to a loss of Rs 45-lakh crore, an earlier leaked Periodic Labour Force Survey 2017-18 report of the National Sample Survey Office (NSSO) had shown that 3.4-crore casual labourers in rural areas, of which 3-crore were farm workers, had lost their job between 2011-12 and 2017-18. The signs of a terrible rural economic distress were all there but it is only that the policy makers refused to see it.
It was as if nothing had hit the Indian economy, which strangely feels turbulence only when the industry fails to perform. It was as if rural India does not exist; as if rural India is somewhere situated in sub-Saharan Africa, so far away so not be of any concern. But if only the Niti Aayog had woken up in time to the grim realities that continued to plague Indian agriculture perhaps the economic slowdown being felt now wouldn’t have been so pronounced. The slowdown is essentially an outcome of a downward spiral in domestic demand, which emanates from a slump in real farm incomes thereby resulting in a collapse in rural demand. Low liquidity has nothing to do with the present crisis.
With ‘near-zero’ growth in real farm income in the past two years, and with less than half a percent growth per year in the preceding five years, between 2011-12 and 2016-17, it was quite apparent that the rural economy was undergoing a sharp slump. Farm incomes are at a low in 14 years. To add to the dismal scenario, a report of the Reserve Bank of India had shown that public sector investment in agriculture had also remained very low -- between 0.3 to 0.4 per cent of the GDP between 2011-12 and 2016-17 -- clearly showed that how a sector which provides the largest employment in the country has been neglected all these years.
All efforts should therefore be to revive the rural economy. But on the contrary, while the crisis was in agriculture it was the industry which built up a sob story showcasing how auto sales were down, the inventory for the real estate was building up, underwear sales were refusing to pick up and Parle biscuits had warned of 10,000 workers at the verge of being laid off since the poor were thinking twice before buying a Rs 5-pack of biscuits. Seeking an economic stimulus package of Rs 1-lakh crore, industry lobby groups were backed by a large section of the media. In the deafening noise that the drum-beaters created, farmers and rural poor were once again forgotten.
All measures to kickstart the slowing economy harbours on improving sentiment, provide more sops and tax concessions to the rich, and thereby providing more money into the hands of affluent sections of the society. But I wonder how will all this help in creating more demand. How will it help in providing more money into the hands of the poor? While everyone agrees that the slowdown is essentially because of a collapse in rural demand, I don’t understand how will measures that provide more money into the hands of those who are actually responsible for the slowdown, be helpful. Isn’t it like what the Chief Economic Advisor K Subramanian had said of India Inc’s tendency to “privatise profits, and socialise losses?”
After all, with almost Rs 8.5 lakh crore of bad loans written-off in the past 12 years, since 2007, and with banks staring at another Rs 17-lakh crores of stressed loans, of which many analysts say Rs 12-lakh crores is unlikely to return, it is the private sector which has already sunk a black hole. Since 2009, ever since the days of the global economic meltdown, the Indian industry has been getting an economic stimulus package of Rs 1.8 lakh crores every year. In other words, it has already received Rs 18-lakh crores by way of a bailout package in the past ten years. All this is in addition to an annual tax concession in the range of 5 per cent of GDP. The Chief Economic Advisor was right when he said that the industry should learn to fend for itself, and not run to the government every time it is faced with a slowdown. When the government provides a stimulus package to bail out loss-making Air India, the industry cries for privatising the public sector airline; but when the loss-making industries seek a bailout package to survive why shouldn’t they be nationalised?
While all eyes are on the Rs 1.76-lakh crore lifeline that RBI has provided, the best option to revive economic growth lies in providing more money into the hands of rural poor. Considering that the average income of a farm family in 17 states of India or in roughly half the country is only Rs 20,000 a year, the cash reserve should be used to double the direct income support to farmers under the PM-Kisan scheme. At present, land owning farmers are given an income support of Rs 6,000 per year. It should be doubled to Rs 12,000 per year per family, which effectively means an income support of Rs 1,000 per month. It is also time to include the landless farmers under the ambit of PM-Kisan.
In addition, public sector investment in agriculture needs to be enhanced significantly. To begin with, efforts should be geared up to upgrade the promised 20,000 village haats into modern mandis. #
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