What happened to rural demand?

MNREGA workers 

Pointing to seven indicators that provide hope, Finance Minister Nirmala Sitharaman claimed the economy is getting back on the track. Replying to a debate on the Union budget for 2020-21 in Lok Sabha, she said: “Government is keen to work with everybody and we want the economy to gallop.”

Elaborating the steps taken to support the engines of growth – consumption, investment and exports – she listed the ‘green shoots’ that have started to emerge. While the Finance Minister detailed the measures taken to show that the economy is moving forward, media reports said on the crucial aspect of boosting consumption the government listed the increase in minimum support price (MSP) of all mandated rabiand kharif crops for 2019-20. If this is all it takes to boost decline in consumption demand, I wonder why rural demand, where it hit the most, slumped in the first instance.

After all, MSP is announced before every crop season, year after year, and a nominal hike in prices is always expected given the rise in cost of production. Paddy price was raised by 3.7 per cent for the 2019-20 marketing season, while the increase in wheat price for the same year was 6.1 per cent. In any case, what perhaps is not being realised is that only six per cent of India’s farmers get to market at the MSP announced. Prices for most other commodities in the open market had prevailed much lower for farmers. In other words, inefficient markets couldn’t have provided the stimulus needed to prop up rural demand.

With the outlay for MNREGA shrinking by 13 per cent, and a steep cut in food subsidies from a budget estimate of Rs 1.84-lakh crore to a revised estimate of R 1.08 lakh crore in 2019-20 to go up marginally to Rs 1.15-lakh crore for 2020-21 clearly showed that rural consumption did not receive any fillip. In addition, for the five major nutritional schemes that address malnutrition, the allocation was reduced by 3.7 per cent. The budget for mid-day meal scheme, National Health Mission and National Rural Drinking Water Mission too faced a cut. Add to it the allocations announced for agriculture and allied sectors, irrigation, rural development and panchayats which just got an incremental increase, there was in reality no fiscal stimulus for rural areas that could have boosted rural demand.

The question therefore is what happened to the declining consumption demand, especially in the rural areas? If rural demand was not a significant factor at times of a slowdown, with growth slipping to 4.5 per cent in the previous quarter, I see no reason why IMF should go to the extent of saying that a slump in rural demand in India pulled down growth, which in turn pulled down global growth. Since the Budget 2020 did not address the crisis of demand, nor were any special measures announced later to provide more money into hands of rural poor, what remains unanswered is how come growth can rebound without any tangible efforts being made to revive rural spending?

If without reviving rural demand economic growth can surge to six per cent in the next financial year beginning April, as the principal economic advisor to the finance ministry has claimed, it will be interesting to know what constitutes consumption demand for them. If consumption demand is only restricted to spike in sales of durables like mobile phones, refrigerators, air-conditioners, washing machines and automobiles etc it shows perhaps rural demand is not even factored in growth calculations. Otherwise there is no reason why the slump in rural demand remained outside the economic radar screen to be seen only in 2019 whereas rural incomes had declined or remained stagnant for over two decades. It is only when economic growth fell to less than six per cent and adequate explanations were not forthcoming for the downhill slide that mainline economists shifted focus to the hinterland for answers.

Since 70 per cent of rural households are dependent on agriculture, the depressing levels of farm incomes over the past two decades should have earlier reflected in the growth estimates. As per an OECD-ICRIER study, farmers suffered a monumental loss of Rs 45-lakh crore in the 16 year period between 2000-01 and 2016-17. Every year, the farmers encountered a loss of approximately Rs 2.54-lakh crores. So much so that even Economic Survey 2016 had estimated that average farm incomes in 17 states of India, which is roughly half the country, stood at a paltry Rs 20,000 a year. In other words, farm families in half the country were surviving on less than Rs 1,700 a month. Such a severe farm distress should have pulled down growth but it didn’t.

As if this is not enough, Niti Aayog estimates showed that during the period 2011-12 and 2015-16 the growth in real farm incomes was less than half a per cent every year. With demonetisation hitting the informal sector, the growth in real farm incomes in 2017 and 2018 was ‘near zero’. Going by the chronology of farm distress, and knowing that farmers barely had enough to manage their subsistent households, how could the acutely distressed rural farm incomes not pull down rural demand in turn? That’s a question that mainline economists and policy makers have conveniently ignored.

As long as the growth continued to hover over six per cent, going to even right and nine per cent for quite a few years, rural India remained outside the economic radar screen. Once again, when growth picks up, rural demand will disappear from the economic discourse. #

What happened to rural demand? Deccan Herald. Feb 21, 2020

https://www.deccanherald.com/opinion/in-perspective/what-happened-to-rural-demand-806630.html?fbclid=IwAR2EIAZfKkPoG-EEkY0YoiMTroV_3omgD_yxFxkx0kcDaHYNWoeQbQTQN18  

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Budget 2020: A lost opportunity

Farmers work very hard only to find they have been shortchanged. 

It’s a lost opportunity. At a time when a slump in rural spending had led to a decline in rural demand pulling down country’s GDP to less than 5 per cent, providing more money into the hands of rural population – where 70 per cent households are engaged in agriculture – was being considered to be the surest way to prop up the economy. At a time when rural consumption is at an all time low, strengthening public expenditure in rural areas would have given a much wanted stimulus to agriculture. 

Knowing that the slowdown was not because of global factors but was driven entirely by domestic reasons -- lack of demand and slackening investments – most economists had suggested pumping in more money by way of direct income support to farmers and farm workers. At a time when bottom 60 per cent of the population holds only 4.8 per cent of the nation’s wealth, enhancing the budgetary allocation under PM-Kisan Samman Nidhi Scheme was considered to be an ideal route. Although I had suggested increasing the PM-Kisan allocation by another Rs 1.50-lakh crore, which would mean a direct income support of Rs 1,500 for a farming family per month, I was thinking at least the government would double the annual allocation for farmers – from the existing Rs 6,000 to Rs 12,000 per year. In addition, the budgetary allocations under MNREGA were anticipated to go up from Rs 70,000-crores, to at least Rs 1-lakh crores to make a meaningful impact. After all, farm wages have dipped to a five year low. 

Not only that the Finance Minister failed to utilise PM-Kisan and MNREGA for creating more rural demand, which would have led to increased consumption thereby leading to a higher economic growth, agriculture and allied sectors, irrigation and rural development and panchayati raj too did not receive any quantum jump in budgetary allocations. The total budgetary provisions this year are at Rs 2.83-lakh crores, which is hardly an increase over last year’s revised estimates of Rs 2.68-lakh crores. The outlay for farm credit has however been increased from Rs 13.5-lakh crore last year, to Rs 15-lakh crore this year. Studies have meanwhile shown that 41 per cent small and marginal farmers do not still avail credit from scheduled commercial banks. What needs to be understood is that farmers do not need more credit. What he needs is a higher income. 

In fact, the budgetary allocation for food subsidy has come down from 1.84-lakh crore to 1.15-lakh crore this year. This has raised doubts whether the government is intending to withdraw from procurement operations. Many farmer groups have raised this concern. Since the Finance Minister in the very beginning of her speech talked of liberalising farmers markets, more concerns have cropped up over the reduction in food subsidy. This assumes importance in the wake of recent developments where the Commission for Agricultural Costs and Prices (CACP) have recommended putting a stop to the open-ended food procurement policy. Already, Punjab and Haryana are under tremendous pressure to cut down on food procurement. Punjab has meanwhile amended the appropriate laws allowing for private sector participation and opening up for of private mandis.   

The 16-point action plan the Finance Minister spelled out as part of the Aspirational India that she talked about provides a roadmap for shifting to corporate agriculture. She said that the government would encourage those States which have implemented the three Model Acts that have been proposed earlier. These relate to land leasing law, market liberalisation and contract farming. Saying that agriculture needs to be made competitive, she listed a couple of programmes to double milk processing by 2025, increasing fish production to 200 lakh tonnes by 2025, integrating financing on warehousing receipts with e-NAM so as to encourage commodity trading. To launch Kisan Rail and Kisan Udaan for transporting perishable commodities too would be beneficial for agribusiness companies. Although much of the 16-point action plan that she listed have already been talked about in previous budgets but I didn't find any separate allocation for these programmes. .  

To lay out a roadmap for the direction of future agriculture is perfectly alright but there is a need to first ascertain how effective the pathway would be. Most of the reforms being brought in agriculture are borrowed from America and European Union. But what is not being explained is that if these policies were effective, why is it that agrarian distress in US/EU is at its peak? The spate of rural suicides in America, for instance is 45 per cent higher than the suicides in urban centres. Real farm income growth has been steadily on the decline in the US since the 1960s. India therefore needs to redesign agriculture in a way that it ushers in rural prosperity. #

READ MORE - Budget 2020: A lost opportunity

Indian agriculture has been in distress for over two decades. Why couldn't economists see it earlier?

Pic courtesy: The Hindu

It was in 2013, when just prior to the inauguration of the annual World Economic Forum (WEF) jamboree at Davos in Switzerland, Oxfam too released its annual global inequality report. Estimating that the richest 100 families in the world had added $ 240 billion to their wealth in a year, the report said the amount of wealth concentrating in the hands of top 100 was good enough to wipe out global poverty four times over. If only that report had been heard and action taken to reduce global poverty, the widening inequality could have been contained.  

A few days back, Oxfam released its latest ‘Time to Care’ report ahead of the 50^th Annual Meeting of the WEF. While it once again clearly brought out how the concentration of wealth in the hands of world’s 2,153 billionaires had accentuated over the years, almost equalling the wealth in the hands of 4.6 billion people or 60 per cent of the global population, it also pointed to the worsening inequality in India. India’s richest 1 per cent holds more than four times the wealth that exists in the hands of 95.3-crore Indians forming 70 per cent of the country’s population. In addition, the combined wealth of India’s richest 63 families was higher than the Rs 24,42,200-crore outlay of the Union Budget for the financial year 2018-19.   

Coming at a time when all eyes are on Budget 2020, it will be interesting to see whether the Finance Minister Nirmala Sitharaman will make an attempt to correct this historical distortion in economic approach. With growth hitting an 11-year low and that too on the back of an economic slowdown, and with big business drumming up fears of fiscal slippage if she resorts to increased government spending so as to spur rural demand, I doubt if the credit rating agencies and the economists working with brokering agencies will allow for any policy space to be utilised for bridging the widening inequality. Already, enough noise is being created in the mainline media warning against any fiscal exuberance, suggesting big-bang measures which harbours on more of the same and therefore keep fiscal deficit within the target proposed.  

At a time when fall in consumption and investment are being considered as the reasons behind the economic slowdown, any meaningful attempt to enhance rural spending will come from providing more income in the hands of the rural poor, which will also go a long way in addressing growing inequality. Regardless of what credit rating agencies have been suggesting, the Finance Minister will have to defy the contours of the predominant economic thinking that has pushed the economy on a downhill slide. An economy which caters to serving the consumption needs of 10 per cent of the population must now look beyond, and as the Prime Minister often says to translate into Sabka Saath Sabka Vikas.   

In other words, Budget 2020 provides a perfect opportunity to set the economic imbalance right.

In economic terms, everything boils down to creating demand. More the demand more is the economic growth. And it is primarily for this reason the 7th Pay Commission was hailed by India Inc as a booster dose for the economy. After all, more income into the hands of employees would mean more demand, and thereby more consumption. Similarly, any further relief in personal income tax is expected to leave more surplus money into the hands of urban middle-class thereby giving consumers more to spend. But again, this fits into an economic thinking that restricts all measures to cater to consumption needs of 10 per cent of the population. On the other hand, I have always argued that unless growth is inclusive the economic benefits will not reach the masses. Considering that bulk of the rural poor comprises farmers and farm workers, the focus has therefore to shift to agriculture.

Of the 95.3-crore Indians that the Oxfam report talked about, at least 60-crore are engaged directly or indirectly with farming.  The first and foremost step is to start viewing agriculture as part of the formal economy. Agriculture should not only be seen as a sector whose only contribution is to ensure that food inflation does not cross the four per cent (plus or minus two per cent) limit as laid down under the Reserve Bank of India (RBI) macro-economic policy, but should be seen as a sector that can create economic buoyancy. More so, at a time when the bottom 60 per cent population holds only 4.8 per cent of the national wealth. This is because agriculture unfortunately has been kept deliberately impoverished so as to keep economic reforms thriving as a result of which agrarian distress remains largely pronounced. According to the Economic Survey 2016, a report that I have often quoted, the average farm income in 17 States of India stands at a paltry Rs 20,000 a year. In other words, farming families in roughly half the country, survive on less than Rs 1,700 a month. At such low incomes, the share of agriculture in country’s GDP is bound to remain low.

The IMF says that declining rural demand has pulled down India’s growth, which in turn has pulled down global GDP. This became known to IMF (and for that matter to mainline economists) only when India’s GDP figures slipped down to less than 5 per cent. But even for the past two decades, farm incomes had either remained stagnant or were in the negative, which means rural spending were already low. This fact was never acknowledged. An OECD-ICRIER study for the period 2000 to 2016-17 shows that Indian farmers had lost Rs 45-lakh crore on account of being denied the rightful price. This was followed by a period when according to Niti Aayog, annual growth in real farm incomes had remained at ‘near zero’. However, not even an iota of concern was exhibited by the World Bank/IMF, the credit rating agencies or India’s mainline economists at the extra-ordinary crisis that prevailed in rural India. As long as GDP hovered at 6 per cent and above, economists failed to see the slump in rural demand.

The launch of PM-Kisan scheme in last year’s budget, providing a direct income support of Rs 6,000 per year per farm family (owning land), for which a budgetary provision of Rs 75,000-crore was made, is a ‘tectonic’ shift in economic thinking. As someone who had relentlessly been seeking an income transfer to the farming community, to partly offset the economic loss farmers have been undergoing year after year, I think PM-Kisan is the right vehicle coming at the right time to increase rural incomes. There is no other policy instrument that can reach all farmers. To make a meaningful impact, my suggestion to the Finance Minister would be to provide an economic stimulus package of Rs 1.50 lakh crore over and above the Rs 75,000-crore that is already allocated under the PM-Kisan scheme. This would provide an amount of Rs 18,000 ever year or Rs 1,500 per month (against Rs 500 at present) which is enough to meet some farm expenses like cost of seed, manure and bio-pesticides. This may not sound to be of much significance for those living in the cities but imagine the implications it has for the rural poor whose income is hovering around Rs 20,000 per year. In any case, the additional allocation under PM-Kisan scheme will flow back into the markets by way of enhanced consumer demand. An effort should also be made to ensure 100 per cent implementation of this scheme. At present, against a total of 14.5–crore farmers, only about 7.6-crore farmers have been covered till Nov 30. Also, the Finance Minister should expand this scheme to benefit tenant farmers.

When farm incomes are low, it has negative fallout on farm workers. According to a study by the Centre for Monitoring Economy (CMIE), in the past one year, 2018-19, almost 1.1 crore people lost their jobs. “Estimated 91-lakh jobs were lost in rural India, while the loss in urban India was 18-lakh jobs. Rural India accounts for two-thirds of India’s population but it accounted for 84 per cent of the job losses,” the report said. Several other studies have shown farm wages declining to its lowest in past five years, and massive job losses being faced by both farm and non-farm workforce. Even the MNREGA scheme, for which a budgetary provision of Rs 61,084-crore was made under revised estimates for 2019 fiscal, numerous reports of payments not being made in time have appeared. To bring the economy back on track, my second suggestion would be to enhance MNREGA budgetary allocation by another Rs 10,000-crore, taking it to Rs 70,000-crore for fiscal 2020.

While the Rs 25,000-crore corpus for last-mile funding for stalled housing projects may help the construction industry, another stimulus of Rs 25,000-crore is needed to prop up the Zero Budget Natural Farming (ZBNF) initiative that the Finance Minister had mentioned in last year’s budget but refrained from making any budgetary provisions. Drawing from the successful reach of the ZBNF programme in Andhra Pradesh, where approximately 5.85-lakh farmers have been shifted from chemical farming systems, it is time to replicate organic cultivation in erstwhile Green Revolution areas, which are faced with severe crisis in groundwater depletion as well as environmental contamination. In addition, an allocation of Rs 500-crore be also made to set up Farmer Markets in major urban centres. This should be to encourage the supply of chemical free farm produce to the health conscious urban population.  

And finally, I expect the Finance Minister to launch an Ease of Doing Farming initiative on the lines of ease of doing business. After all, if 7,000 steps for ease of doing business can be laid out for the industrial sector, agriculture too needs it desperately. At every step, linked to production and marketing, a farmers faces obstacles that are primarily because of lack of governance. This will go a long way in making agriculture an economically viable and environmentally sound enterprise. A vibrant agriculture will create so much of demand that the wheels of development will never be faced with a slowdown. Try it, to experience it. #

Source: 'Ease of Doing Agriculture' is the way forward. National Herald. Jan 31, 2020
https://www.nationalheraldindia.com/opinion/ease-of-doing-agriculture-is-the-way-forward?fbclid=IwAR2j0nI_Zg5XA1MMD6z77toBjeFfYZpy-eHubUqcXKtQ6VpVYkdeegq3oG8  

READ MORE - Indian agriculture has been in distress for over two decades. Why couldn't economists see it earlier?

Minimum Support Price for farmers can be raised three times.

Pic courtesy: Hindustan Times

Finally, the government has admitted in Parliament that it is not possible to double farm income by 2022. Replying to a question by Samajwadi party leader Ram Gopal Verma in Rajya Sabha, the Minister of State for Agriculture Purshottam Rupala, categorically stated: “We agree with Ram Gopalji’s query that it is not possible to double farm incomes with the current growth rate in agriculture sector. “

With a growth rate in agriculture hovering at less than 4 per cent annually, the minister agreed it wasn’t possible to double farmers’ income in the stipulated period. The Dalwai committee on Doubling Farmers Income (DFI), set up in April 2016, had projected a farmer income growth rate of 10.4 per cent to achieve this, and many economists say this would require a very high economic growth rate.  Knowing this may sound too ambitious, I am glad the minister has finally put a lid on a promise that wasn’t so easily workable. He agrees to follow other approaches, including enhancing non-farm income.   

This should hopefully put an end to endless series of seminars, conferences and workshops on Doubling Farmers Income that are being held in universities, institutes, colleges and by civil society organisations for over two years now knowing very well that it wasn’t possible to do so. At a time when real growth in farm incomes had remained ‘near zero’ in the past two years, and prior to that the Niti Aayog had estimated real farm incomes to be growing at less than half a percent every year during the five year period 2011-12 to 2015-16, not many talked of the radical structural transformation that agriculture is crying for. Instead the emphasis remained on following upgradation and refinement of available approaches by focusing on schemes like soil health cards, neem coated urea, Fasal Bima Yojna, National Agricultural Markets (e-NAM), more crop per drop etc., which are important but surely not enough for doubling farm incomes. What is needed is direct income support, which is a better way of income augmentation.  

Although the government has set up an Empowered Committee for implementation and monitoring of the recommendation of the DFI Committee report, submitted in Sept 2018, the acknowledgement that doubling farmer income in the next two years is not possible, it will certainly help in initiating long-term reforms that the sector is in dire need of, and where the focus needs to shift to. The first and foremost is the need to boost public sector investment in agriculture. The continuing bias against agriculture becomes apparent when one looks at the Reserve Bank of India statistics, which tells us that the public sector investment in agriculture had remained close to 0.4 per cent of the GDP between 2011-12 and 2016-17. Considering that nearly half the population is dependent on agriculture, this speaks volumes of the deliberate neglect of farming.

I don’t think any economist can vouch for a miracle in agriculture without adequate investments flowing in. Not even half a per cent of the GDP is being invested in agriculture year after year, primarily because the dominant economic thinking does not consider agriculture to be an economic activity. The entire effort therefore has been to move people out of agriculture rather than to focus on making farming a viable and sustainable enterprise. This has to change, and an indication to this came from the BJP manifesto which promised an investment of Rs 25-lakh crore in agriculture. But the Budget 2019-20 makes a provision for Rs 1,30,485-crores for agriculture, including Rs 75,000-crore allocated for the remaining three instalments of PM-Kisan scheme. Besides direct income support, agricultural market infrastructure (including warehouses and godowns) needs appropriate budgetary allocations along with investments for village link roads connecting villages with new upcoming APMC mandis.

Interestingly, while agricultural scientists and economists normally shy away from spelling out the radical reforms agriculture needs for enhancing real farm incomes as well as to restore the lost pride in farming, the Punjab and Haryana High Court has in a judgement said the Minimum Support Price (MSP) for agriculture should be three times the cost of production to save farmers from distress. “Though the MSP is being announced since 1965, but the stark reality is that it has not boosted the income of farmers to bring them out of abject poverty. Time has come when MSP be given legal force by granting legal rights to the farmers to get fair value for their crops.” The direction to provide a legal status to MSP by bringing in an appropriate legislation came from a division bench of Justices Rajiv Sharma and H S Sidhu who also spelled out a series of reforms measures, including removing middlemen, setting up warehouses, weather-based crop insurance, using internet technology, debt servicing, farmer suicides and so on that agriculture requires.

Earlier, the Commission for Agricultural Costs and Prices (CACP) had also called for making MSP a legal entitlement. It had specifically highlighted how farmers in remote parts do not have access to regulated APMC markets and therefore have to sell their produce in the local haats much below the MSP. In the past two years, farmers had reportedly sold pulses, oilseeds and coarse cereals at prices ruling 20 to 30 per cent lower. Even in the case of wheat and rice, the two crops that are procured, farmers are unable to realise the minimum price except at places where a robust procurement system prevails. Low prices of wheat and paddy in Bihar for instance forces many unscrupulous traders to transport the produce to Punjab and Haryana to get a higher MSP. 

Making MSP a legal instrument instils not only confidence among farmers, but will also assured minimum price to farmers thereby enhancing farm incomes, reducing debt, and minimising farm distress. In addition, raising MSP to three times the average weighted cost of production, including imputed rent and interest on owned land and capital, is certainly a very valid recommendation. This alone has the potential to bring about a remarkable turnaround in the performance of agriculture. It is doable, and my suggestion is to have two price bands – one at which the procurements are made at MSP, and the second be the actual price that the farmer has to be paid. Considering that all farmers are now linked with Jan Dhan bank accounts, the gap between the two bands can be directly transferred to the farmer’s bank account.

Such a delivery system will ensure that food inflation remains in control, and at the same time farmers get the legitimate price they are entitled to but have been deprived of all these years. Of the Rs 25-lakh crore investment promised in the BJP manifesto, even if Rs 5-lakh crore are disbursed as enhanced price to farmers routed through the flagship PM-Kisan scheme, the face of Indian agriculture will change forever, for the better.

The time has come to emerge out of the continued obsession with growth figures in agriculture. It is time now to invest in human resource, which is the biggest strength of Indian agriculture. More investments in raising real farm incomes, more of farmers’ money will automatically be invested in improving farm techniques. Furthermore, higher the farm incomes, higher will be the rural demand generated, thereby speeding the wheels of industrial development. At a time when the country is passing through a slowdown, creating more demand remains the biggest challenge, which can only come from agriculture. Investing in agriculture therefore is the surest way to bailout the economy. This is the way to Sabka Saath, Sabka Vikas.# 

READ MORE - Minimum Support Price for farmers can be raised three times.

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

READ MORE - What should the next PM do to address agrarian crisis

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/

READ MORE - Only a vibrant agriculture can address the employment crisis