Aug 11, 2016

Agriculture has paid the price for keeping economic reforms alive.



Twenty-five years after the economic reforms were unleashed, the first-ever socio-economic survey for rural areas, published in 2015, paints a gloomy picture. Portraying a stark reality the survey says that for 70 per cent of India’s 125-crore population, which lives in rural areas, poverty is the way of life.

Rural India is poorer than what was estimated all these years. With the highest income of a earning member in 75 per cent of the rural households not exceeding Rs 5,000 a month, and with 51 per cent households surviving on manual labour as the primary source of income, the socio-economic survey had exposed the dark underbelly of rural India. Considering that the bulk of rural population comprise of farmers, what the socio-economic survey tells is how the reforms have very conveniently bypassed agriculture.

The National Sample Survey Organisation (NSSO) consumption expenditure data for 2011-12, done a few years earlier, tells us the same story. If you live in a village and spend more than Rs 2,886 per month you are among the top 5 per cent of the country. For the urban areas, the cut-off limit is Rs 6,383 per month. That makes me as well as you, the reader, in the same category as Mukesh Ambani, Ratan Tata and Narayana Murthy. While we may fall in the upper 5 per cent bracket but imagine the fate of 95 per cent of the population which is unable to spend more than Rs 6,383 per month in the urban areas every month? Isn’t that the real India that we don’t want to talk about?  
Now, let me break-up the rural income slab for you. Economic Survey 2016 tells us that the average income a farmer gets from farming activities, including what he keeps for his family consumption at home, in 17 states of India is Rs 20,000 a year. In other words, the monthly income of a farmer in these States is a paltry Rs 1,666. On a national level, the NSSO works out the average monthly income that a farmer derives from farming operations to be just Rs 3,000 per family. Compare this with the basic salary of a chaprasi at Rs 18,000 per month it become obvious how agriculture has been neglected all these years.

The deplorable condition of farmers is certainly an outcome of economic reforms. Simply put, economic liberalization or economic reforms or market economy whatever you prefer to term it has not only bypassed the majority population but has been actually a pre-requisit for the success of economic reforms. Agriculture, like other unorganized sectors, has been deliberately kept impoverished so to make economic reforms work. 

It was in July 1991 when Dr Manmohan Singh delivered the historic budget speech as Finance Minister that opened up the country to economic liberalization. I recall the speech wherein he unshackled the industries from the control regime and showered all bounties on industries and in the very next paragraph acknowledged that agriculture remains the mainstay of the economy. But since agriculture is a state subject, he left it to the state governments to provide the much needed impetus to farming. But what he forgot to say was that industry too was a state subject and should have been left to the state governments. The bias therefore was clearly visible.

This was simply not unintended fallout of the process of economic liberalization. It was actually part of a design. Later, in 1996, the World Bank directed India to move 40-crore people out of rural areas to the urban areas in the next 20 years, saying that land is a precious asset in the hands of people who are inefficient producers, meaning farmers. Since the younger generations among farmers do not know anything except farming, World Bank suggested that India set up a network of training institute to train these people to become industrial workers. This should be accompanied by land rentals and land acquisitions. This suggestion was made in the 2008 World Development Report by the World Bank and a year later, in 2009, India made provision for setting up 1,000 Industrial Training Institutes (ITIs). 

Going by the World Bank prescription, successive governments have been blindly playing to the tune. As Prime Minister, Manmohan Singh had time and again said that 70 per cent farmers in India were surplus and need to shift to urban areas. RBI Governor Raghuram Rajan is on record saying that the big ticket reform will be when India moves a large share of the farming population to the cities. And more recently, Finance Minister Arun Jaitley has blamed agriculture for not being able to provide subsistence to a large section of the population thereby increasing inequality.

What he forgot to say was that successive governments had deliberately starved agriculture of financial resources and had kept the farming population impoverished. This is evident from the way agriculture remains a low priority area when it comes to budgetary allocations. In the 11th Plan, agriculture received only Rs 1-lakh crore as budget outlay for the 5 years. In the 12th plan period, agriculture got Rs 1.5-lakh crore. Incidentally, the budgetary support for agriculture, which employs 52 per cent of the population, is less than the annual provisions being made for MNREGA. In addition, the Minimum Support Price (MSP) for wheat and rice had remained almost frozen, with annual increase in farm prices not exceeding 4 per cent on an average. No wonder, 48 per cent farmers want to quit agriculture if given an alternative.

In fact, the plight of agriculture is not only deliberate but has for all practical purposes sustained the economic reforms. If the farmers were paid their economic due by way of let’s say a higher MSP, the industrial and business sector would have gone for a toss because of the additional costs involved for paying higher labour wages that incorporates resulting high food prices. At the same time, a higher price for farm produce would have raised the cost of production of many industries. In addition, a high paying agriculture would have also reduced the rate of migration and thereby reduced the availability of cheaper labour for infrastructure and real estate.

The reluctance on the part of the government to implement the Swaminathan Committee report, which recommends 50 per cent profit over the cost of production, also stems from the same concern. In a written affidavit before the Supreme Court, the government has made it clear that providing a higher price would distort the markets. It is primarily for this reason that the Ministry for Food and Consumer Affairs has directed the State governments not to provide any bonus for wheat and rice over and above the MSP announced. 

The real cost of economic reforms therefore is being borne by rural India, of which farmers constitute the majority. The first-ever Socio Economic Census has clearly brought out the stark reality. India’s performance when measured as per the Human Development Index too shows the burgeoning inequality. India ranks 130 among a ranking of 188 countries. The economic reform that we talk about therefore has largely been pro-rich. The rich 1 per cent own 51 per cent of country’s wealth. The economic wealth of 15 families in India equals the economic wealth of 600 million people.

Keeping agriculture impoverished all these years has sustained the economic reforms. Going by the income parity norms, the MSP for paddy, which has been fixed at Rs 1,450 per quintal this year, should have been Rs 5,100 per quintal. In case of wheat, the MSP should be Rs 7,600 per quintal. This is the legitimate right of a farmer, if we were to maintain a parity with other sections of the society, which has been denied to him. I have time and again stated that at the pace at which the salaries of government employees, college professors and school teachers has been hiked, agriculture has been denied that parity as a result of which farmers are dying.

The big bang reform India needs is essentially in agriculture. Providing the rightful income into the hands of farmers is what will push domestic demand and at the same time revitalize the rural economy. If the 7th Pay Commission is being seen as an economic booster, as it is expected to create more demand for consumer goods, imagine the kind of shot in the arm a higher income in agriculture will give to the Indian economy. If wheat farmers for instance were to get Rs 7,600 per quintal as the MSP, imagine the economic growth that it will result in for the rural areas. In fact, the fact remains agriculture alone has the capability to boost the Indian economy.

Unfortunately, agriculture is been knowingly sacrificed to keep the present phase of economic reforms somehow moving. In other words, 60-crore farmers are paying the cost of unjust economic reforms. #

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