Pic courtesy: Business Today
There are three very significant findings that should shape the lists of economic measures that the Finance Minister Nirmala Sitharaman is expected to spell out while presenting the budget on Feb 1. Especially at a time when the challenge is to pull the country out from an economic slowdown, a few corrective steps in the right direction can surely pave the way for churning back the stalled wheels of growth.
A few months’ back media had talked about people thinking twice before buying a pack of biscuits costing Rs 5. This was followed by a consumer expenditure survey report of the National Sample Survey Office (NSSO) – which was later shelved by the government – concluding that the purchasing power of the rural poor is on a decline, computing that the poor in the villages are able to spend only Rs 19 a day to buy food. And more recently, the Niti Aayog itself has acknowledged in a report on Social Development Goals (SDG) Index 2019 released a few weeks back saying that poverty, hunger and inequality has grown in 22 to 25 States and Union Territories.
Taking these three reports together, and weaving a set of measures that brings more money into the hands of the poor, is what will drive the economy. This is what mainline economists call as generating more demand. Most economists agree that the problem is on the demand side, which means unless the poor is able to purchase a Rs 5 packet of biscuits without thinking twice, and unless the rural farm and non-farm wages show an upward trend, which in turn depends largely on revival of agriculture. With farm incomes dipping to the lowest in 15 years, and farm wages on the decline for the past five years, rural spending continues to be low thereby pulling down rural demand.
In other words, since agriculture engages nearly 50 per cent of the population, and has the potential to re-energise the dampening rural economy, Finance Minister’s focus should be on providing more income into the hands of farmers. In any case, let’s not forget that growth in real income of farmers has been almost ‘near zero’ in the past seven to eight years. Therefore, tax concessions to the corporate and the middle class can wait, but the poor can’t. In addition, to enhancing the budgetary provisions under MNREGA, the four priorities that Nirmala Sitharaman must focus on are:
To begin with, providing an enhanced direct income support, through the PM-Kisan Samman Nidhi scheme, should be the first priority. Adding to the financial allocation of Rs 75,000-crore already made in the previous budget, another provision of Rs 1.50-lakh crore needs to be made under this scheme enabling farmers to receive Rs 18,000 per year as guaranteed income, which comes to Rs 1,500 per month. This amount may not be anything significant for the urban middle class but imagine the difference it will make to farm livelihoods in half the country where the annual farm incomes are a maximum of Rs 20,000 per year. This scheme is already applicable to all land owning farmers, and further it needs to be expanded to include tenant farmers. My first recommendation to the Finance Minister therefore is to provide an economic stimulus package for agriculture, which surely will go a long way in boosting rural spending.
My second suggestion is to set up a fund, call it price support fund or farm livelihood fund, under which a cess is imposed on all value added products which are based on agricultural commodities. For instance, Punjab produces 120-lakh tonnes of rice. If a cess of Re 1 per kg is imposed, Punjab alone will generate a price support fund of Rs 1,200-crore from rice. Take another example of Kerala, which produces 40-lakh tonnes of rice, which means Rs 400-crore can flow into the fund. Similarly, for wheat, a cess of Re 1 for every kg of atta sold, will bring in a huge revenue. Add to it major farm products like sugar, dals, milk and milk products, spices, edible oils, cotton textiles etc, a huge fund can be generated every year. Not only major agricultural commodities, value added products and processed foods too need to have a cess imposed, the cess value varying from a product to product depending on its profit margin.
All these years, farmers have been subsidising the consumers. An OECD-ICRIER study shows that between 2000 and 2016, farmers had incurred a loss of Rs 45-lakh crore on account of being denied their rightful income. The report also says that the loss farmers suffered helped consumers get a retail price advantage of 25 per cent. I think the time has come when consumers need to pay back farmers, and contributing through a price support fund is the most appropriate way.
In last year’s budget, Finance Minister had talked about Zero Budget Natural Farming (ZBNF) but had refrained from making any financial allocations. This was followed by the Prime Minister Narendra Modi asking farmers to move away from chemical fertilisers. Speaking on the Independence Day he had appealed to farmers to shun chemical farming. This is a very significant suggestion coming at a time when intensive agriculture is being blamed for at least a quarter of the greenhouse gas emissions (GHGs). Numerous studies globally have shown how chemical agriculture has led to serious environmental destruction, mining of underground water, and contaminated the entire food chain.
Although the name suggests Zero Budget, it does not mean that the promotion and expansion of natural farming does not require any budgetary allocation. My third suggestion to the Finance Minister is to provide at least Rs 25,000-crores for replicating Andhra Pradesh’ experiment with natural farming in a phased manner. This has to be followed up with the creation of a separate marketing network for organic produce.
And finally, lack of adequate marketing infrastructure is coming in the way of farmer’s getting the right price for their produce. Against the requirement of 42,000 Agricultural Produce Marketing Committee (APMC) regulated mandis there exists at present some 7,000 mandis. Although the government had two years back announced upgrading 22,000 village haats, the progress is very slow. Besides speeding it up, adequate allocations need to be made to widen and improve the network of available mandis, and village link roads. #
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