What should the next PM do to address agrarian crisis

Woh Subah Kabhi To Aayegi

Pic courtesy: Hindu Business Line

The launch of PM –Kisan Samman Nidhi Yojna (PM-Kisan) scheme just before the code of conduct came into force, providing for a direct transfer for Rs 6,000 per year into the bank accounts of small farmers, even though meagre, was in a way an obvious admission of the severity of the agrarian crisis. Five years into power, and despite the promise of doubling farmers’ income by the year 2022, farm incomes had in reality plummeted to its lowest in 15 years necessitating a dramatic policy measure to provide farmers with some semblance of hope.

At a time when the Niti Aayog had admitted that farm income rise in the past two years (post 2016) had remained almost at near-zero and prior to that, in the five year period 2011-12 to 2015-16, real farm income had risen by less than half a per cent every year, 0.44 per cent to be exact, the introduction of PM-Kisan was the outcome of a realisation that agriculture is in dire crisis and was crying for direct income support. For the first time, the government signalled willingness to move from ‘price policy’ to ‘income policy’ and this in my understanding is a tectonic shift in economic thinking.

The launch of PM-Kisan under which the transfer of the first instalment of Rs 2,000 was swiftly made in to the accounts of beneficiary small farmers that the government could immediately identify, was soon followed with an electoral promise of Nyuntam Aay Yojna (NYAY) by the Congress president Rahul Gandhi. Promising to provide Rs 6,000 per month into the bank accounts of 20 per cent of the poorest if voted to power, the Congress too has finally admitted that direct income support is what is urgently required to pull out the poorest of the poor from abject poverty, which would in case include a large proportion of small and marginal farmers. Let’s not forget, as per Economic Survey 2016, the average income of a farming family in 17 states of India, which means roughly half the country, is a paltry Rs 20,000 a year or in other words less than Rs 1,700 per month.

Agriculture has remained at the bottom of the spectrum. For almost four decades, farm incomes have practically remained static, if adjusted against inflation. Farmers have been denied their rightful price, and in fact market prices have prevailed much below the administered prices for most crops for most harvesting seasons. According to a joint study by OECD-ICRIER, between 2000 and 2017, farmers have suffered a cumulative loss of Rs 45-lakh crores on account of low prices. And still, the farmers have demonstrated immense resilience and somehow survived against all odds. Any other sector of the economy would have collapsed by now. No wonder, rural distress is at its peak, which is quite evident from the spate of farm suicides that shows no signs of ending. To avoid any more embarrassment, the government has refrained from making public the farm suicide data for the past two years.

Although the political narrative of muscular nationalism after the attack at Pulwama has overshadowed the issue of agrarian distress, the biggest challenge for the incumbent government would be to first address the complex issue of continuing rural distress. Considering the massive increase in the number of farm protests across the country over the past few years, the new Prime Minister will find it difficult to postpone the problem anymore. Continuing with the promise of direct income support, a series of initiatives both short term and for the long run will be required to pull agriculture out of crisis. In my understanding, here are a series of steps that the Prime Minister must focus on:

      1. Set up a Commission for Farmers Income and Welfare: This Commission should work out farm prices, provide an assured farm income package and spell out other welfare measures. This Commission should subsume the existing Commission for Agricultural Costs and Prices (CACP) and ensure a minimum monthly income package of Rs 18,000 per farmer family. The income package should be arrived as a top-up over the monthly average income a farming family is getting in a district. This data is available and it should not be difficult to work out the prevailing average farm income per district.   

2    2. Farm Loan Waiver: A one-time loan waiver for farmers should be immediately done. Already some states have waived farm loans totalling Rs 1.9 lakh crore since 2017. It s expected that the total quantum of bad loans in agriculture should be around Rs 3.5 lakh crores, which needs to be waived. Farmers cannot be expected to become economically productive without first offloading the past burden. The nation needs to stand with farmers at this hour of difficulty. The farm loan waiver should not be a financial burden on the state governments either, but instead be routed through the banks like in the case of corporate loan write-off. Let the Centre recapitalise the banks for the farm loan waivers just as it does for the corporate NPAs.

      3. Public Sector Investments: Reserve Bank of India data shows that public sector investment in agriculture had hovered between 0.3 to 0.4 per cent of the GDP between 2011-12 and 2016-17. Consequently private sector investment in agriculture too has been low. Considering that nearly 50 per cent population is directly or indirectly engaged in farming, it is time to shift the focus on strengthening agriculture by boosting public sector investment. Unless agriculture receives adequate investments it is futile to expect farming becoming a profitable enterprise.

      4. Ease of Doing Farming: Agriculture is stranded because of tremendous bottlenecks that farmers encounter at every stage. It is more a victim of lack of governance. If industry can be provided with 7,000 steps for ease of doing business I see no reason why agriculture cannot be accorded a similar priority in farming operations. This should be accompanied with the setting up of a task force at the national (as well as state levels) to monitor its implementation at every stage. It should identify the steps that need to be initiated to make farming farmer-friendly.

5    5. Price and Marketing Reforms: There is an urgent need for market reforms, which should essentially begin by expanding the existing network of APMC regulated markets. At present there are about 7,600 APMC mandis against the requirement of 42,000 mandis to be set up in five kms radius. This must be accompanied by reforms in APMC set up helping in breaking the cartels that operate. At the same time, APMC reforms must be accompanied by complete procurement of farmers produce at the minimum support price (MSP). #     

What the next PM should do to alleviate rural distress. Deccan Herald. April 24, 2019

https://www.deccanherald.com/opinion/comment/what-the-next-pm-should-do-to-alleviate-rural-distress-730400.html?fbclid=IwAR0lNi-G_qdV63wiZebFj6ICPVElwNexAo_dy0ytzJdbwDMYyPNlxqGmnkk

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Only a vibrant agriculture can address the employment crisis

In April, the Railway Recruitment Board received over 1.6-crore registration for 35,000 jobs of typists, stenos, account clerks, ticket collectors etc. In Punjab, over 6-lakh students appear for an International English Language Testing System (IELTS), the examination that young students aspiring to migrate abroad must first clear. Such is the crave for leaving abroad that IELTS coaching has become a roaring business, estimated to be over Rs 1,100-crore. With agriculture becoming economically non-viable and with no jobs to look up to, Punjab youth is increasingly keen on leaving the country.

While you are still grappling with the long-term implications of growing unemployment in the country, here comes another shocker. The Bangalore-based Azaim Premji University has in its State of Working India-2019 report said that 50 lakh people lost their jobs between 2016 and 2018. A month earlier, a leaked Periodic Labour Force Survey 2017-18 report of the National Sample Survey Office (NSSO) had shown that 3.2 crore casual labourers in rural areas lost their job between 2011-12 and 2017-18. Of these, roughly 3-crore were the farm workers showing a decline of 40 per cent in jobs availability for farm workers. Some economists have analysed this report and found out that between 2011-12 and 2015-16, manufacturing jobs alone declined from 580.6 lakh to 480.3 lakh, showing a job loss exceeding 1-crore.  

From unskilled to skilled, from uneducated to educated and even to those with high qualification, jobs have been shrinking. In Uttar Pradesh, 3,700 doctorate degree holders, 28,000 post-graduates and 50,000 graduates applied for just 62 jobs of peon. The job basically requires a minimum qualification of class V pass and the ability to ride a bicycle. And this is not the first time highly qualified people have applied for such low jobs. No wonder the Azim Premji University study shows that rising unemployment among the higher educated, the less educated as well as for the informal labour force there has been job losses and reduced work since 2016, the year demonetisation was announced.

At a time when massive unemployment prevails in the urban areas, the number of workers in agriculture too shrunk between 2004-05 and 2011-12. This is being hailed by mainline economists as a brighter side of the job loss nightmare that the country is witnessing. The argument is that the translocation of agricultural workforce to the cities is a sign of economic growth, and it is for the first time that such a clear sign of people moving away from the villages has been seen. Like his predecessor, even the new Chief Economic Advisor Krishnamurthy Subramanian has called for shifting people from agriculture to the cities, which are in need of cheaper labour.

I find this argument regressive. It comes from the same flawed economic thinking that the World Bank/IMF has been promoting all these years. Since Indian economists, and considering most of them occupying higher positions in India have been trained abroad, this flawed thinking has become the unwritten policy design. Way back in 1996, the World Bank had directed India to move out 40-crore people from the rural to the urban areas in the next 20 years, by the end of 2015. More recently the National Skill Development Policy document had made a promise of reducing rural workforce from 57 to 38 per cent by the year 2022. This was based on the premise that urban areas need dehari mazdoor and that can only come from agriculture.

This is a sad reflection on the way economic prescription are borrowed and blindly implemented. In a country where 70 per cent work force still lives in the rural areas, imagine the futility of moving a large percentage of the population to swarm into the cities looking for menial jobs. I have always wondered why can’t Indian economists and policy makers for a change spell out a policy design that aims at making agriculture profitable and thereby revitalise the rural industry. Once there is more money in the hands of rural work force, more demand would be generated, and that would mean the wheels of economic growth will zoom to a much higher trajectory.

While Indian economists failed to emerge out of the World Bank’s blinkered economic thinking, China has taken a leap forward. With nearly 60 per cent of its population forced to move into the cities over the past few decades of rapid industrialisation, China now realises its mistake. With most of the skilled jobs in the cities moving away to Africa where a still cheaper labour force is available for the foreign investors, China has now launched a ‘reverse urbanisation’ programme to take care of the idle or underemployed work force.

According to a report in South China Morning Post, an estimated 70-lakh people, most with higher educational qualification, have moved back to the countryside last year, with 60 per cent reportedly getting back to farming. This also became essential considering the decline in domestic agricultural production as a result of which imports soared. With unemployment and underemployment rising, and with agricultural production dipping, China has taken the right step to what is proverbial known as killing two birds with one stone. Adequate rural infrastructure is being laid out, and a translocation subsidy is also being provided to those who opt for rural areas.

In India, there is no other alternative to creating more jobs than to strengthen agriculture, create more infrastructures in the rural areas, and at the same time provide for more social security in the form of public sector education and health services. With the introduction of PM-Kisan scheme, which initially promise a direct income support of Rs 6,000 per year for farmers, which I am sure will be enhanced in the times to come, the first step of providing an additional income into the hands of farmers has already been taken.

While economists are refusing to change, it’s the political thinking that is beginning to show signs of maturity. First, NDA announced PM-Kisan scheme, and this was followed by Congress with an electoral promise of Nyuntam Aay Yojna (NYAY) promising Rs 6,000 per month to the lowest 20 per cent of the population, a clear pointer to what political leadership sees as a road ahead for economic development that is more inclusive. Both the parties are now beginning to realise what I have said for long: agriculture alone has the potential to reboot the economy.#

कृषि क्षेत्र से ही पैदा होगा रोजगार  Amar Ujala, April 19, 2019

https://www.amarujala.com/columns/opinion/employment-will-arise-only-from-agriculture-sector?src=foryou&fbclid=IwAR2QD-8_OPS8L1E0qeIx2ubXez03zBvKuan9OW4fha7ES2F_CPrGMQj1JDw  

Reboot from farms. Orissa Post. April 18, 2019

http://www.orissapost.com/reboot-from-farms/

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Is Rahul Gandhi's minimum income guarantee scheme, NYAY, economically viable? My interview

Pic: from the web

Will Congress president Rahul Gandhi's proposed minimum income guarantee scheme, Nyuntam Aay Yojna, or NYAY, free India from poverty? This question was asked by India Today to six economists.  

Here is my reply. You can see the detailed response from all of us if you click on the link at the end of the interview. 

Q: Is a scheme that promises Rs 72,000 a year to 25 crore Indians below the poverty line economically viable?

Surely, implementing a guaranteed minimum income package benefitting 20 per cent of India’s poorest is economically viable. It all depends on the intent behind it. If the government wants to really help the poorest, finding adequate money is never a problem. But I find it strange that this question is invariably asked whenever some allocations are made for the poor. No one asked when the 7^TH Pay Commission was announced, which when implemented across the States, PSUs, Colleges/Universities will bring in an additional annual burden in the range of Rs 4.5 to Rs 4.8-lakh crore every year. No one ever asked the same question when massive corporate bad loans are written-off by the banks, Rs 3.17-lakh crore between 2014 and 2018. Former CEA Arvind Subramanian had even said that writing-off corporate loans leads to economic growth. But on the contrary waiving farm loans for the poor farmers are viewed as credit indiscipline. This is a reflection of the inherent bias in modern economic thinking.  

Q: What do you think will be the challenges in implementing such a scheme?

Although Rahul Gandhi has still to spell out the delivery mechanism that is expected to provide Rs 6,000 every month to 20 per cent poorest households in the country, the task of indentifying the real beneficiaries will certainly be an administrative nightmare. Estimating the income level of the poor to draw out the real beneficiaries will of course be a cumbersome process. But I am sure as the scheme progresses, since it is to be implemented in a phased manner, it will be possible to iron out the bottlenecks and remove other hurdles. It has to be planned in such a manner that it turns out to be inclusive. 

Take a lesson from Telangana, which launched the much talked about Rythu Bandhu scheme, providing direct financial support twice in a year to farmers. In 2018 kharif season, Telangana government has transferred Rs 5, 257-cr to over 51 lakh farmers. Not a small achievement but before launching the scheme, Telangana officials had moved in swiftly across the districts to set the land records right and to remove other hiccups. If the will is there, a suitable pathway can always be created.    

Q: Will it address the issue of rural distress and can it boost the economy?

Investing in rural areas is the only viable long term solution to many of the problems India faces – hunger, poverty, youth unemployment, forced migration and climate change. The promise of Rs 72,000 per year to the poorest points to a significant shift in economic thinking – moving from credit to income support. More money in the hands of the rural poor means more demand will be created, and more demand will reignite the wheels of the industry thereby boosting economic growth.

Considering a decline in casual farm labour to the extent of 40 per cent between 2011-12 and 2017-18, and even the non-farm wages shrinking in the last five years, the job crisis in rural areas is certainly explosive. Added with the steeply declining farm incomes, which have already touched the lowest in 14 years, rural India is crying for attention. More so at a time when public sector investments in agriculture had remained abysmally low, hovering between 0.3 to 0.5 per cent of the GDP between 2011 and 2017.  Rural India therefore is the future. In fact, I have been saying for long that addressing rural distress, beginning with revival of agriculture alone has the potential to reboot the economy.

Q: What are the long term implications of such a scheme on poverty reduction?

In the long-term, direct income support is one of the major effective instruments to fight poverty. MNREGA in that sense is a classic example. This has to be of course accompanies by a set of economic reform measures, including investments education, health and rural infrastructure. Providing more money into the hands of the poor, who also carry dreams and aspirations like anyone else, gives them an opportunity to unleash their entrepreneurship ability.

To be born in debt and live in debt all through his life is virtually like living in a hell. Normally the poor, and that includes farmers, often are born in debt and die in debt. A direct income support provides them an opportunity to emerge out of the shackles of indebtedness. And this will have long term consequences in making poverty history.

Trickle-down theory has failed to make an impact. Trickle-up is what is desperately required.

Q: How does the promised scheme compare with existing welfare schemes of the government?

The proposed Nyay scheme should not be considered as a welfare scheme that we generally know about. It is an income augmentation scheme, and should be considered as a powerful mechanism to revitalise economic activity in the rural areas thereby reducing rural to urban migration. It will reduce inequality, help reduce rural distress, and pull out masses from abject poverty. Unlike the existing 950 central government schemes, direct income support alone has the potential to reboot the rural economy, and if executed well it may perhaps change the face of Indian economy – leading truly to Sabka Saath Sabka Vikas.

Q: Do you think it will help the Congress woo the electorate better?

Well, that depends on how the Congress is able to take the message to the masses. #

The price of NYAY. India Today. April 8, 2019.

https://www.indiatoday.in/magazine/cover-story/story/20190408-the-price-of-nyay-1488343-2019-03-29?fbclid=IwAR0_6eou841nOP7Xf3tI523Ujjjjf3Yesbb4LQnIq1fhS7DTWcAosT3ups0

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