The writing was on the wall, a clear pointer to the deep agrarian distress that continues to prevail over the decades. Before a ‘leaked’ 2017-18 National Sample Survey Office (NSSO) report on consumption expenditure — which the government decided to shelve — showed that rural households were spending less and less on food, the Economic Survey 2016 had brought out the unpleasant truth. The average farm income in 17 states, which means roughly half the country, stood at a paltry Rs 20,000 a year, which indicated the low farm household expenditure on consumption.
While the leaked consumption expenditure survey pegged the per capita monthly expenditure on food in rural areas at Rs 580 (roughly Rs 19 a day), the Economic Survey had shared data pertaining to average farm income based not only on what the farming families were able to sell, but also adding what they saved for household consumption. One was often left wondering how these families would be surviving with income levels of less than Rs 1,700 a month. With farm prices remaining depressed, several other studies pointed to farm incomes sliding to a 14-year low, and farm wages, too, showing a marked decline over the past few years.
Another leaked document, the Periodic Labour Force Survey 2017-18 report of the NSSO, had shown that 3.4 crore casual labourers in rural areas (3 crore were farm workers) had lost their jobs between 2011-12 and 2017-18. With unemployment worsening over the past 45 years, the crisis had certainly gone beyond farming.
While all these reports pointed to the deteriorating economic wellbeing of a rural family, the implications it had on pulling down rural spending were not difficult to foresee.
Economists, however, remain divided over trying to manoeuvre a reliable way out of the downturn. While mainline economists agree that weaker consumer demand and slowing private investments are the two key factors that have slowed the economy, leading economic growth to a six-year low of 4.5 per cent in the July-September quarter, the prescriptions being suggested are aimed at the top of the ladder.
Industry associations find the slowdown to be an appropriate opportunity to push for more reforms in the form of cheaper and easy land acquisitions, labour laws, reducing corporate tax, removing tax terrorism, fast-tracking of bankruptcy resolutions and, of course, providing yet another sector-based stimulus.
While mainline economists generally agree that it is the bottom of the pyramid that needs more attention, a set of booster doses that have already been announced to reinvigorate the economy relate essentially to corporate tax stimulus, real estate, automobile sector, bank consolidation and recapitalisation, export incentives, and some sops to micro, small and medium enterprises. A few economists have questioned the need to provide tax breaks to an industry which is already sitting comfortably over cash. They have said that it is not the way to bolster the sagging economy.
With already 5 per cent of the GDP going as revenue foregone, an additional cut in corporate tax rate providing a stimulus of Rs 1.45-lakh every year is only going to further weaken the tax revenue position. Finance Minister Nirmala Sitharaman has also hinted at a relief on the personal income tax in the next Budget.
To say that tax concessions will encourage businesses to invest more in greenfield projects, and eventually help in providing more jobs is not backed by international experience. Nobel laureate Paul Krugman has shown that corporate rate tax cuts in the United States, which received a fillip after President Donald Trump took over, have neither brought in investments nor created jobs. The money the corporate saved was, instead, invested in the stock markets.
No wonder, the Indian stock markets too went into a celebration mode the day after the corporate tax rate cuts were announced.
While the celebrations still continue, and the inflow of foreign funds has increased after the tax rate cut, my worry remains about a large section of the poor who are finding it difficult to buy a Rs 5 pack of biscuits; about those who are struggling hard to market their crop harvest at a remunerative price; about those farm and non-farm workers who are finding it hard to secure a sustainable daily wage.
For the population in the poor category, especially in agriculture, no specific incentives are being announced. More so at a time when a study by the Organisation for Economic Cooperation and Development and the Indian Council for Research on International Economic Relations (OECD-ICRIER) had earlier shown that farmers lost an estimated Rs 45 lakh crore in the 16-year period, from 2000-01 to 2016-17, on account of being denied the right price. Niti Aayog’s own estimates showed the growth in real farm incomes, in the past two years, to be ‘near zero’.
In other words, for two decades in a row, farmers have been at the receiving end, with almost stagnant or declining incomes. It only elaborates the primary reason behind what is seen as a deepening survival crisis. The growth rate in farm wages, too, has been slipping. When agriculture, which engages nearly 50 per cent of the population, is in a crisis, the reverberations it carries on the economy are bound to be intense.
The revival of agriculture, therefore, holds the key. If there is one sector of the economy which is in dire need of an economic stimulus, it is agriculture. The time is appropriate to compensate farmers.
To begin with, if an amount equivalent to the Rs 1.45-lakh-crore tax relief per year to the industry was allocated, instead, to agriculture, it would triple the direct income support amount under the PM-Kisan scheme to Rs 18,000 per year (Rs 1,500 per farmer per month) and extend the scheme to landless farmers as well. Already Rs 75,000 crore is allocated for the PM-Kisan scheme, which needs to be raised by adding another Rs 1.45-lakh crore. The more money in the hands of the poor, the more will be the demand generated, which is the crying need.
Follow it up with measures to make public procurement more effective, expand the network of APMC (Agricultural Produce Market Committee)-regulated mandis; and assure MSP (minimum support price) for all crops for which it is announced, meeting the gap in MSP and market prices by deficiency payments. In addition, drawing from the experience of Kerala, set up a debt relief commission in every state. And invest more in rural roads and public services like schools and health centres in rural areas.#
Agriculture in need of economic stimulus. The Tribune. Dec 17, 2019
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