The economic order is subtly changing.

Economic growth: When people matter 

Pic courtesy: brinknews.com 

The economic order is changing. And it is the United States that is setting the ball rolling.

“In one policy area after another – from trade to taxation to labour markets – the decades old consensus in the United States has been replaced with something very different,” writes Dani Rodrik, Professor of International Political Economy at the Harvard University, in a column he wrote for Project Syndicate. For years, I have read Prof Rodrik with a lot of interest, especially his writings on international trade. A strong champion of free trade, he had always wanted developing countries to reduce tariffs and in the process prepare domestic industry for global competition, thereby bringing in efficiency.

Although he thinks free market enthusiasm among economists is now waning, with developing countries not showing any more excitement at the traditional export-oriented industrialisation model they had vigorously pursued since the days of economic liberalisation, he argues that developing countries should not blindly ape what is happening in America. This suggestion comes at a time when the pandemic has exposed the fault lines making countries go more into a protectionist shell. 

While it is clear that the US has taken a step back from aggressive market fundamentalism, and of course from the so-called Washington Consensus – a set of economic policy recommendation for developing countries that became popular in the 1980s – to now say that developing countries should be doubly cautious and “would be wise to consider their own countries’ circumstances carefully before following America’s lead” in reality points to the ground slowly slipping away for macro-economic policies that created a fear psychosis from rising debt and inflation thereby limiting the fiscal space for human and public sector investments primarily in health, education and agriculture.  

Strange, isn’t it? When the Washington Consensus or the process of market-fundamentalism was pushed to the developing countries, and more importantly to Latin American economies, no one ever told them to be extra cautious before following the economic prescription given the different circumstances and environ that prevailed in each country. The policy prescription for development that the World Bank/IMF had doled out for the developing countries all these years has never been country-specific. In fact, developing countries were hardly left with any policy space to suitably alter or adapt the economic design keeping the domestic circumstances in focus.

As film-maker Michael Moore had in his book Stupid White Men (2001) clearly brought out how every loan that the bank gives comes with roughly 140 - 150 conditionality’s that the recipient country has to follow. That made it relatively easy to dictate and to make sure the countries don’t deviate from the path laid out.

The same mindset prevails when it comes to the continuing farmers protest in India against the three central farm laws. While the fundamental principles on which the Indian laws are based essentially come from the same kind of free market design that is now beginning to be challenged, the US says the contentious laws “will improve the efficiency of India’s markets and attract greater private investment.” Interestingly, when questions are asked about the failure of market reforms in agriculture in the rich developed countries, where farming is faced with a severe economic crisis, we are told that it is not fair to compare given the different conditions that prevail. But when it comes to framing the farm laws, we forget to look at our own needs and circumstances, and we go by the same failed economic thinking that prevails in the western countries -- increasing private investments in agriculture will lead to production efficiency and eventually to price discovery.

Nevertheless, the shift in economic policies since the new American President Joe Biden took over is focusing more on human capital and on  bridging the yawning economic inequalities. Welcoming the “Build Back Better” economic agenda that the President has laid out, Nobel laureate Joseph Stiglitz says it would ‘provide public investments in the nation’s physical and human infrastructure, as well as in our tattered safety net’. He is among the 17 Nobel laureates in economics who have in a signed letter come out openly in support of the new economic package. Given that the wealth of the richest 400 people in America has increased by a whopping $1.4 trillion in just two years -- since 2019 – the call is growing for a reconciliation package that invests more in the poor.

It makes economic sense. As Joe Biden has publicly acknowledged – and he is the first Head of the State to say so explicitly – that the Trickle Down theory has been a failure and his governments focus will be to help incomes increase at the bottom and in the middle, challenges the basic premise on which capitalism is based. More so at a time when workers wages remain frozen since 2009 at $7.25 per hour, and long queues of cars can be seen waiting outside the food banks, the wealth of America’s billionaires during the pandemic has skyrocketed. To give you an idea, the wealth of Elon Musk, CEO of Tesla and SpaceX, has risen by $150,800,000,000; for Jeff Bezos, the co-founder of Amazon, by $75,000,000,000 and Mark Zuckerberg, CEO of Facebook, by $74,200,000,000. No wonder, the Nobel laureates have called for tax reforms – and that too at a time when corporate tax rates have drastically come down over the years -- so as to raise adequate resources to fund public sector investments in areas that are critical to the welfare of the society at large.

On the contrary, in India, mainline economists and policy makers remain untouched by the winds of change. In lot many ways, I find Indian economists are far behind when it comes to meeting the long-term social and economic needs of the country, which will eventually make us realise the Prime Minister’s vision of Sabka Saath Sabka Vikas. Pushing for more aggressive reforms, as the American experience has shown, only leads to accumulation of wealth at the top. The economic design calls for a change, keeping in mind the urgency climate change has thrown up, so as to meet the hopes and aspirations of a growing population. The sooner the change begins to happen, the better it will be. #  

Source: US Economic prescription has many lessons for India. Bizz Buzz, Sept 24, 2021. https://epaper.bizzbuzz.news/Home/MShareArticle?OrgId=249a52f2979&imageview=0 

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Time to rewrite reforms, bring in a desi version.

Pic Courtesy: Deccan Herald

At a time when there has been enough of eulogising and back-patting to celebrate the 30^thanniversary of the 1991 economic reforms, former Prime Minister Manmohan Singh, the main architect of these reforms, has in a statement said: “It is not a time to rejoice and exult but to introspect and ponder. The road ahead is even more daunting than during the 1991 crisis.” 

Coming at a time when just two of the global studies -- the first being the first instalment of the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) sounding a ‘code red’ warning for humanity, with the UN Secretary General Antonio Guterres categorically stating: “The evidence is irrefutable; greenhouse gas emissions are chocking our planet and placing billions of people in danger.” What the crucial report fails to however acknowledge is how neoliberal economics, treating GDP as a measure of growth, has literally heated up the planet. Or else, how can one explain that the world’s top 1 per cent add twice the amount of emissions that half the world generates.  

The warning is to ensure that the world doesn’t breach a temperature rise of 1.5 degrees Celsius in another 20 years. But considering that 1.1 degree Celsius increase has already been recorded, I don’t know how many more years it takes to drum up heat by another 0.4 degrees. Nevertheless, the way the world has heated up resulting in the climate going topsy-turvy in the years of industrial growth shows there is something fundamentally flawed with the way the economic growth design was laid-out. 

The second of the global study is the successive rounds of inequality reports presented by the international charity Oxfam at the World Economic Forum clearly bringing out how the rich have become richer, and the poor getting poorer -- a strong pointer to the immediate need to rethink reforms. If the top 1 per cent in India holds a wealth that is equivalent to more than four-times the wealth held by 73 per cent of the population, the role economic liberalisation played in exacerbating inequality cannot be glossed over. If Jeff Bezos, who recently took a space flight, can earn $ 8 billion a day and still pay less tax than a stenographer it tells us how the global model of economic reforms have helped the super-rich to amass wealth. In India, like elsewhere, easy money and economic stimulus have gone into the stock market. No wonder, the stock markets are booming at a time when the global economy is struggling. 

Inequality is bad economics, and accumulation of vast wealth by a tiny group of people is clearly an outcome of some inherent flaws in the growth prescription. As the advocacy group Public Citizen tells us that the collective wealth of CEOs of US Big Tech companies, which had reached $ 651 billion in 2021, was enough to wipe out global hunger, get rid of malaria, vaccinate the world with Covid shots, and end homelessness in America. And these billionaires would still be left with enough to splurge. 

In India, a tiny fraction of the huge wealth that the top 1 per cent has accumulated should have been enough to wipe out poverty and make hunger history. Economist Surjit Bhalla had some time back stated that Rs 48,000-cr can eradicate poverty for one year from India. If that is true, and considering that hunger is a dimension of extreme poverty, I don’t see any reason why India be ranked at a dismal 94 in a list of 107 countries in the Global Hunger Index 2020. And that too at a time when food stocks have been overflowing for several years in a row. Add to it the growing unemployment; and the continuing agrarian distress, amplified by the farmers’ protest around New Delhi; the time is ripe not for deep reforms but to bring in a humane set of reforms that measure up to the growing needs of public health, education, agriculture, environment protection and reducing economic disparities. 

A healthy and dignified life depends on various factors, including a healthy environment. According to the 2020 Environmental Performance Index (EPI) India ranks at a lowly 168 among 180 countries for which the index is prepared. The report says that the countries that ranked higher “generally exhibited long-standing commitments and carefully constructed programmes to protect public health, conserve natural resources and reduce greenhouse gas emissions.” Not that the rich countries have achieved these social and environmental protection goals as would have been required, considering that just 90 companies as per a study have collectively spewed 63 per cent of the emissions since the beginning of the industrial age. This only shows the need for Indian economists and policy makers to work out a more sustainable and inclusive pathway. 

This is something that the chest-thumping original proponents of economic reforms should have focused on, but their sloppy understanding of the phrase - reform -- seen only as an euphemism for privatisation, has pushed us in the same flawed IMF-led global trajectory. Instead, the policy imperative should have been to ensure that the majority population at the middle and bottom of the pyramid too earns more, thereby creating a huge rural demand, and in the process revitalising the rural economy. 

Indian policy makers missed a historic opportunity to look beyond the well-orchestrated ‘Washington Consensus’ design and layout a desi model of economic reforms that was built treating agriculture as the second engine of growth. Instead of pushing people out of agriculture, the emphasis should be on converting this sector, which continues to be the largest employer, into a powerhouse of economic growth. 

It is possible even now. Learning from the devastation that industrial agriculture has brought to the farming landscape in the rich countries, and the huge agrarian distress that globally free markets have resulted in, the key lesson is to redraw reforms bringing in tenets of an economically viable, profitable and ecologically-sustainable food farming systems where farmers receive an assured income by way of an assured price, and consumers get safe and healthy food. #

Source: Reforms must reduce economic disparities. The Tribune. Aug 13, 2021. https://www.tribuneindia.com/news/comment/reforms-must-reduce-economic-disparities-296772?fbclid=IwAR3OuQCXbXk0Cz65ssLgAAQUyI2RQGv5MDN43e5dSG2nNjy0yTP5CMHpURw

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Post Covid-19, future belongs to reviving agriculture

In the midst of an economic slump, reflected through the tumbling of GDP figures for the first quarter of the financial year, agriculture has emerged as the only bright spot. Riding on the back of a bountiful rabi crop harvest, agriculture has in reality turned out to be the real saviour. With kharif sowings exceeding by over 8 per cent, and the monsoon rain behaviour being normal so far, India is expected to be heading towards another record harvest. 

In these depressing times, agriculture alone provides a ray of hope. At a time when the gross value added (GVA) – value of goods and services produced minus the cost of inputs and raw materials that has gone into its production -- declined across the spectrum, agriculture and allied activities grew by 3.4 per cent.   

With most industrial houses pulling down shutter at least for the first two months of the lockdown, economic activity got severely curtailed. The GDP growth therefore tanked by a steep minus (-) 23.9 per cent – the lowest among the 20 big world economies – the sharpest decline since India began computing quarterly GDP numbers in 1996. Add to it the staggering job losses; the economic hit for the average citizen has been too traumatic. Private consumption being limited to essential buying only, salary cuts and leave without pay added to their woes. As if this is not enough, 18.9 million salaried people and another 6.8 million daily wage workers lost their jobs since April, as per the estimates of the Centre for Monitoring of Indian Economy (CMIE). 

This is in addition to the estimated 30 million migrant workers (if intra-state migration is considered, the numbers swells to 80 million) who trudged back home, some walking hundreds of kilometres, carrying their children on their shoulder or in tow, in what is seen as the biggest reverse migration since the days of the Independence. Besides the large numbers, the painful long march in a way brought out the failure of economic policies that had rendered farming uneconomical over the decades. With the cost of production rising, and the output prices remaining stagnant or declining, the terms of trade in agriculture had remained negative. Therefore, instead of making all provisions to bring the migrant workers back to the cities, the effort should now be directed to reverse the economic model that continues to push people out of rural areas. Considering that 70 per cent of the rural households are engaged in agriculture, the time has come to bring the focus back on revitalising agriculture. Turn it into a powerhouse of economic growth.

While the pandemic has certainly exposed the fault lines, it will require a set of new ideas and a strong political will to reshape the new economic agenda that will spur economic growth, create employment and at the same time protect nature and environment. Following the same old prescription of economic growth – sacrificing agriculture for the sake of industry – has outlived its utility, as evident from the extent of reverse migration. Agriculture being the biggest employer, the post-Covid-19 challenge instead should be to strengthen rural livelihoods, bring more income in the hands of the farming community, which alone has the potential to realise the dream of Sabka Saath Sabka Vikas. As Qu Dongyu, the Director General of Food and Agricultural Organistion of the United Nations (FAO) said: “Past progress was sustained by the benign trickle-down effects of strong economies. This is not the case anymore. The facts have changed, and so must our minds.” 

It certainly was not an Act of God that pushed agriculture into the throes of a continuing agrarian distress. Agriculture has in reality been a victim of a biased economic thinking perpetuated by the World Bank/IMF aimed at drastically reducing the dependence on farming. Over the decades, farm incomes have therefore been deliberately kept low so as to bring in macroeconomic stability required to boost growth. With inflation target kept at 4 per cent, plus and minus 2 per cent, and since food items carry a relatively higher weight in the computation of consumer price index (CPI), farmers ultimately end up paying the price of keeping food inflation low.

Take the case of paddy procurement price for the ensuing kharif harvest season. While the MSP has been increased by 2.9 per cent, the Commission for Agricultural Costs and Prices (CACP) has acknowledged that the composite input prices for paddy cultivation have increased by 5.1 per cent. 

In any case, fixing the procurement prices keeping in consideration the fallout it will have on inflation is one of the objectives of the CACP’s farm price policy. Even during the lockdown, when agriculture performed well, retail inflation for farm workers being higher than the gain in farm incomes, farmers in reality suffered income losses. This is borne by a joint survey conducted by Gaon Connectionand Centre for the Study of Developing Societies (CSDS) which showed that a majority of the farmers did not receive the right price (equivalent to MSP) for their produce. Several other studies over the years have shown how the farm prices have remained static or frozen.   

That is why I have always maintained that when farmers undertake cultivation they do not realise they are actually cultivating losses. 

It is agriculture that is actually crying for bold reforms. Agreed, in its present form, agriculture cannot emerge as the engine of growth. But let’s not forget, a healthy agriculture requires a prosperous farming community, which is only possible if the emphasis shifts to ensuring a significantly higher and an assured monthly income to farmers. This has to be accompanied by a sharp increase in public sector investments in agriculture, health and education. Is this possible? Of course, it is possible provided the mainline economic thinking changes with the changing times.  

 Agriculture served as the lifeline during the pandemic. The challenge now is to ensure that agriculture no longer remains the laggard but becomes an equal partner in growth. That’s the new normal that India should shift its policy direction to. 

Agriculture comes up trumps. The Tribune. Sept 4, 2020 https://www.tribuneindia.com/news/comment/agriculture-comes-up-trumps-136054?fbclid=IwAR1xb7L964sY8zfYWJovpP0YEofPCnUgSSAv1xv8jdfoBbIZtPzrga-kQe0 

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A Rethinking in Economics is Urgently Needed.

This biased economic thinking has to change. While farm loan waiver is despised at, corporate bad debt write-off is believed to lead to economic growth ! 

Former US Labour Secretary Robert Reich tweeted the other day: “America’s richest 1 per cent now owns half the value of the US stock market. The richest 10 per cent own 92 percent. So when Trump says the stock market is the economy, know who he’s really talking about.” Well, Trump is not the only head of a State, who believes that a booming stock market is a reflection of the state of the economy, the list of such leaders is pretty long. This shows how effectively credit rating agencies have drilled the idea into our minds.

Even on a day when India’s Finance Minister rises to present the annual budget all eyes are on the stock markets. When in Sept last, Nirmala Sitharaman announced a slew of measures to build up domestic demand at times of a slowdown; she presented a tax concession bonanza of Rs 1.45-lakh crore to the industry, reducing the basic corporate tax rate to 22 per cent, the celebrations next day were observed on the stock markets. Shares jumped by as much as 5 per cent, the highest in 10 years as some media reports indicated. If only the same amount had been allocated for providing more money into the hands of the poor, stock markets would have remained subdued but perhaps more demand could have been generated thereby refuelling the economy.

Even now, when globally the pandemic has left economies bleeding, the stock markets are on a Bull Run prompting Nobel laureate Paul Krugman to say there is something terribly going wrong. This is also evident from the fact that the top 614 of America’s billionaires increased their wealth by over $ 584 billion between Mar 18 and June 17 while more than 45.5 million Americans joined the unemployment queue in the same period. While, much of the wealth increase is related to the Wall Street, economic bailouts and stimulus packages have helped transfer more money into the pockets of the stinking rich. On top of it, is the ‘printing’ of surplus money in the form of Quantitative Easing (QE). According to Fitch Ratings, global QE asset purchases are expected to touch $ 6 trillion in 2020. By bolstering the financial and property markets, this helps the rich become richer. But rarely have I seen the universities deliberating on the need to make QE work for the people. Why does it invariably fail to become part of the economics curricula or be a part of media debates is beyond my understanding?

In India, while the industry is lobbying hard to seek further tax concessions to the tune of Rs 2.50-lakh crore by bringing the corporate tax slab to a low of 15 per cent, an Oxfam study had earlier pointed to a creation of 117 million jobs if the richest 1 per cent globally were to be made to pay an additional tax of just 0.5 per cent over the next ten years. If we look at it economically, this makes terrific sense. To promote inclusive and sustainable growth, UNCSD tells us that creating employment and decent job opportunities will ultimately drive progress. But then why mainline economists have invariably failed to demand imposition of a slightly higher corporate tax if it could lead to such huge employment opportunities, still continues to baffle me.

In the past 30 years, says Bernie Sanders, the wealth of top 1 percent has gone up by $ 22.65 trillion, while the wealth of bottom 50 percent has gone down by $776 billion. “This growing wealth inequality is morally obscene,” he regretted. Inequality is not only related to wealth accumulation, but also stems for an ideological bias. In India, a former Chief Economic Advisor had once said that writing-off corporate bad loans leads to economic growth. The question that wasn’t asked is how come when both the corporate and farmers draw loans from the same banks, writing-off of corporate bad debt leads to economic growth whereas farm loan waiver upsets the national balance sheet? Similarly, why should nations continue to blindly pursue the outdated economic theory that workforce from agriculture needs to be shifted to the urban centres, primarily to ensure that companies don’t have to pay higher wages? Is it not a reflection of an ideological position?

Similarly, why is that any additional investment in agriculture, public health and education is seen as a drag on the economy? For instance, why is it that a sledge hammer blow of a pandemic made the government realise the importance of public health. “The public sector has an inescapable obligation towards health. The private sector alone cannot fulfil it. Of course, there will be public-private partnerships. Over the next five years, the Centre alone should be able to at least spend 2.1 per cent of the GDP on health,” N K Singh, chairman of the 15^th Finance Commission recently said. Whatever the reason, even in normal times the emphasis on public health should not have diminished. But if only the reports of the finance commission for instance were deliberated and hotly debated in the class rooms will the future economists not get a peep into how our financial policies lays the framework for declining public sector investments in social sectors, and also lead to the kind of stark socio-economic inequalities.

Still, the bigger lesson is that if Britain can spend 9.6 per cent of its GDP on public health, why should India not try to catch up with at least 6 per cent to begin with? Why should public sector investment in agriculture continue to hover around 0.4 per cent of the GDP (between 2011-12 and 2017-18) when the sector employs roughly 50 per cent population? Why should the poor continue to live on the margins while the rich are routinely provided with massive bank write-offs, tax cuts and subsidies packed in the name of incentives for growth? Why should we have socialism for the rich, and leave poor to the market forces? Why should growth economics come in conflict with nature?     

These are not difficult questions, but need a rethinking in economics. #

Incentives for the rich, raw deal for the poor. The Tribune. July 13, 2020

https://www.tribuneindia.com/news/comment/incentives-for-the-rich-raw-deal-for-the-poor-112198?fbclid=IwAR2Ih8KFiZ2oQluyebEEYjktGfixk19VaH28aXx-8lBEjcfdA0qMAncAV-g 

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Providing An Assured Monthly Income is the First Step Towards Addressing Agrarian Crisis

A decade after Avtar Singh committed suicide unable to bear the pressure to repay farm loan; his two sons took the same fatal route. Roop Singh, 40, and his younger brother Basant Singh, 32, jumped into the Bhakra canal in Punjab. They were residents of Patiala district in Punjab.

Two generations of the family were consumed by the scourge of mounting farm debt. While the two sons ended their lives in November 2017, their father had died some 10 years earlier, in 2008. Both the brothers together owned 2.5 acres of land and were cultivating another 30 acres on contract. But unable to generate any profits, the outstanding debt continued to swell. After all, how long can a farmer be expected to draw credit from multiple sources to repay the initial loan amount. The vicious cycle of mounting indebtedness eventually takes its toll.

There is hardly a day when reports of farmers committing suicide do not appear in Punjab newspapers. Punjab, the country’s food bowl, is no exception; the serial death dance across the country shows no signs of abating. The tragedy that struck these farming families symbolises the
agony that the entire farming community is living with. There is hardly a day when farm suicides are not reported from one part of the country or other. In the past 21 years, more than 3.20-lakh farmers have committed suicide; every 41 minute a farmer ending his life somewhere in the country. Those who have refrained from taking the extreme step are no better. They continue to somehow survive, living in acute distress, and hoping against hope. Several studies have shown that almost 58 to 62
per cent farmers sleep empty stomach.

Farmers are in reality the victims of an economic design. A recent report by CRISIL points to the denial of a rightful income as the major reason behind the agrarian crisis sweeping through the country. “While the average annual growth in Minimum Support Price (MSP) was 19.3 per cent between 2009 and 2013, it was only 3.6 per cent between 2014 and 2017,” the report states. This minimal increase in the MSP does not even correspond to the annual rise in DA for the government
employees. In order to keep food inflation under control, successive governments have denied farmers their rightful income. The entire burden of keeping food prices low has been very conveniently passed on to farmers. In other words, it is the farmers who are bearing the entire
cost of subsidising the consumers. Farmers are being deliberately paid less, kept impoverished. Still, what farmers don’t realise is that every time they take to cultivation, they actually cultivate losses.

The Commission for Agricultural Cost and prices (CACP) computes the net returns. Let’s try to see whether the net returns have increased. In Maharashtra, which has been faced with massive silent protests by Marathas, and which I believe is the primary reason for the discontent, the net return per hectare for paddy is Rs 966, which means if worked on a monthly basis it will come to less than Rs 300 a month. For Ragi, Maharashtra farmers actually incur a loss of Rs 10,674 per hectare; for Moong (minus Rs 5,873); for urd (minus Rs 6,663). Even for cotton, the net return is only Rs 2,949 per hectare. Considering that cotton is sown in June and its harvesting begins in October, with the
pickings going on to November, December or even January, the average income per month from cultivating cotton comes to a paltry Rs 700 per hectare. 

Viewed from the national level, the net returns for crops like paddy, sugarcane, maize, and cotton have actually declined in the past three years. For most of the dryland crops, the returns are in the negative. If the farmer is destined to harvest losses, I wonder what kind of technological and financial support can bail them out. Giving them more credit, even if it comes from institutional agencies/banks, has only pushed them further into a debt trap. As a former Prime Minister Chaudhury Charan Singh had once remarked: A farmer is born in debt and dies in debt.

The mandate for CACP, which works out the MSP for various crops, is not only to provide an assured price to farmers but also to ensure that it does not lead to inflationary pressures. The prices therefore are deliberately kept low, and in many cases are actually less than even the cost of production that the farmers have to entail. This economic design is not in any way peculiar to India, it is global. As John F Kennedy had once remarked: “Farmer is the only man in our economy who buys everything at retail, sells everything at wholesale and pays for freight both ways.” But what is not being realised is that farmers in US/Europe are being paid massive subsidies, including Direct Income Support. In
India, farmers only receive input subsidies which actually benefit the manufacturers.

The entire burden of keeping food prices low has been very conveniently passed on to farmers. In other words, it is the farmers who are bearing the entire cost of subsidising the consumers. While farmers were denied their rightful income, huge salary jumps were provided to other sections of the society. From a monthly salary of Rs 90 per month in 1970, the salary of school teachers for instance jumped by 280 to 320 times by the year 2015, a period of 45 years. In the same period, salary of
government employees went up by 120 to 150 times; and that of college professors by 150 to 170 times. Wheat price for farmers on the other hand has increased by a paltry 19 times in the same period.

Farm incomes remain almost frozen or bare enough to cover only the cost of production. Keeping food prices low is also in consonance with the dominant economic thinking aimed at drastically reducing the work force in agriculture.

This is what the World Bank had desired way back in 1996. It had expected 400 million people to be moved out from the rural to the urban areas in India by the years 2015. Since every World Bank loan comes with roughly 140 to 150 condionalities, each loan re-emphasised the urgency to move farmers out of agriculture. Former Prime Minister Manmohan Singh had time and again expressed the need to shift 70 per cent farmers. Former RBI Governor Raghuram Rajan used to say that the biggest reforms would be when farmers are moved out of agriculture, to meet the ever-growing demand of cheaper labour for the infrastructure industry. The National Skill Development Council already has spelled out plans to bring down the population in farming from the existing 52 per cent to 38 percent by 2022. For all practical purposes, debt and farming have now become synonym.

Seventy years after Independence, and 55 years after the Green Revolution was launched, economic freedom continues to elude farmers. Economic Survey 2016 made it abundantly clear. Accordingly,
the average income of a farming family in 17 States of India does not exceed Rs 20,000 a year. In other words, farming families in roughly half the country are surviving on less than Rs 1,700 a month. Knowing that it is not possible to rear a cow in the same amount, I shudder to think how
these families survive year after year. 

It is generally believed that expanding irrigation and raising crop productivity is the way to enhance farmers’ income. If irrigation and high productivity alone could raise farmers’ income I see no reason why Punjab, the food bowl of the country, has lately turned into a suicide hotspot. Punjab has 98 per cent cultivable area under assured irrigation and the crop productivity matches with the best in the world. With 45 quintals per hectare productivity of wheat and 60 quintals/hectare for rice, Punjab tops the global chart. And yet, Punjab is witness to a spate of suicides every week. Policy planners have refrained from looking beyond raising crop productivity as the answer to the worsening agrarian
crisis.

I am of the firm opinion that a tinkering here and there is not going to address the agrarian crisis. It needs a holistic approach, a paradigm shift in economic thinking. To begin with, the effort should be to make farming economically viable. After all, everything boils down to how much net income a farmer gets in his hand at the end. Therefore, three steps that immediately need to be considered are:

1) The Commission for Agricultural Costs and Prices, which works out the MSP for crops, should be directed to factor in 4 allowances in the MSP being paid to farmers – House allowance, Medical allowance, Educational allowance and Travel allowance. So far, the MSP only covers the cost of production. Compare with the government employees who get a total of 108 allowances.

2) Since MSP benefits only 6 per cent farmers, it needs to be understood that the demand for providing 50 per cent profit over MSP will benefit only these 6 per cent farmers. For the remaining 94 per cent farmers, who are dependent on the exploitative markets, the need is to redesign the CACP into a Commission for Farmers Income and Welfare, with the mandate to provide a minimum assured monthly income package of Rs 18,000 to a farmer’s family. 

3) Public sector investments must come in urgently for constructing APMC mandis, and also for storage godowns. At present, there are only 7,700 APMC mandis. What India needs is to set up 42,000 mandis for every 5 kms radius. And like in Brazil, where it is mandatory for a market
yard to procure anything a farmer brings, APMC mandis should be quipped to do the same. #

The article was first published in the State of India's Environment 2018. 
https://www.downtoearth.org.in/blog/agriculture/it-s-time-we-shift-farmers-economic-burden-62229?fbclid=IwAR11LZLo9TYdHKTpljocjIHGxougPjmkf0HRWlBNGE4HU-rrC029mKRV37g

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Understand the economic design that pushes farmers out of agriculture

In case you missed watching it, here is the video of an interview in Hindi that I gave to popular #AajTak TV Channel, that went viral.

खेती का चक्रव्यूह 2/5

To know more, click on the links below.

खेती का चक्रव्यूह :- 1/5

खेती का चक्रव्यूह 3/5 :-

खेती का चक्रव्यूह 4/5 :-

खेती का चक्रव्यूह 5/5 :-

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