May 25, 2015

Modi Govt's 1 year: Is agriculture the weakest link or there is something more to it?

As Prime Minister Narendra Modi’s government completes one year in office, many believe that the one sector that missed attention and remains the weakest link in the economic growth story is agriculture.

With close to 60-crore people engaged in agriculture, and considering that this is probably the first time the BJP broke through its image of being an urban-centric party by mustering political support from all across the country in its historic electoral triumph, the continuing neglect of agricultural should not be perceived as an economic oversight. It’s actually designed as part of a well-thought out economic strategy to shift bulk of the population out of agriculture.

Let there be no doubt. Arvind Panagariya in his inaugural piece on the Niti Ayog website wrote: “But in the long run, the potential of agriculture to bring prosperity to a vast population remains limited. In sum, agricultural growth and expansion of good jobs in industry and services can go hand-in-hand to bring rapid elimination of poverty and shared prosperity for all.” This sums it all.  The Narendra Modi government is not neglecting agriculture. It is creating conditions that enable more and more farmers to abandon agriculture.

I am sure you will agree that otherwise no vice-chairman of country’s economic think-tank could have said it so loudly and clearly if he didn’t have the mandate to say so.

Keeping agriculture impoverished therefore is the easiest way to make this happen. Otherwise I see no reason why at a time when the international prices of agricultural commodities are witnessing an unprecedented crash, and when a partial drought in 2014 accompanied by unseasonal rains in the early part of 2015 has left farmers battered and bruised, the Modi government remains unfazed.  Except for providing a relatively higher crop compensation for rain-hit farmers, motivated more by the national TV media suddenly waking up to the agrarian crisis, there is nothing that shows government’s seriousness in tackling the worsening farm crisis. In fact, with El Nino hovering over, there is a possibility of a drought which will further accentuate the farm crisis. 

In a complete U-turn to its electoral promise of providing 50 per cent higher minimum support price (MSP), the government has informed the Supreme Court that it cannot do so considering the impact it will have on market prices. The farm prices have therefore been raised by a paltry Rs 50 per quintal, corresponding to an increase of just 3.6 per cent. At the same time, BJP-ruled States – Madhya Pradesh, Chhattisgarh and Rajasthan – have been directed not to provide any bonus over and above the MSP. Moreover, with WTO breathing down its neck, the government may now find it difficult to raise as well as extend the MSP provision for other crops, except for wheat and paddy.

Paying farmers a distress price and then to say that ‘the potential of agriculture to bring prosperity for a vast majority of the population remains limited', is in fact a clever ploy to kill agriculture and move people out to urban areas. If farmers were to be paid an economic price for their harvest there is no reason why agriculture cannot be a prosperous sector. Similalry if Govt employees were not to be paid a fair income package, they too would quit government employment. There is also no denying that children of farmers do have aspirations and would like to buy motorcycles and iPads. Agriculture too can meet these aspirations provided the mainline economic thinking allows farming to prosper.

Not only declining farm incomes, agriculture also is being starved of public investments. At a time when MNREGA outlay is higher than that for agriculture I don’t know how a miracle can be ushered in the rural areas. In the 11th Plan, agriculture received just Rs 1-lakh crore. This is less than the subsidy of Rs 1.62-lakh crore given for the construction of the Terminal-3 of the New Delhi airport. In the 12th Plan, agriculture which employs 60-crore people, received Rs 1.5 lakh crore. With such dismally low public investments, all efforts seem to be somehow to keep the farm sector gasping for breath. As if this is not enough, mainline economists are lobbying for drastically cutting down on social security support under the garb of containing the fiscal deficit. 

I am hoping that the Prime Minister would see through the futility of forcing small farmers to become dehari mazdoors. The challenge is how to revitalize agriculture in a manner that it not only provides gainful employment but also gears up to withstand the challenges of feeding the country in the years to come.I am sure Narendra Modi understands the importance of spreading the gains of economic development far and wide. There is no better pathway than to make agriculture an economically viable proposition. But only if his economic advisors let him do so. #

Is agriculture the weakest link or there is something more to it? May 25, 2015.