As Finance Minister Arun Jaitley prepares to present the Budget on February 1, one issue will dominate his mindspace: agriculture. With large sections of India’s population depending on the farm sector, continuing distress has reached crisis proportions.
And this predicament manifested itself in the recent Gujarat elections where the BJP retained its majority but lost 16 seats from its 2012 tally. After the polls, Gujarat Chief Secretary J N Singh attributed this loss to farmer distress and unemployment. The distressing after-effects of demonetisation were felt most acutely in the agrarian economy.
This year sees Assembly elections in eight states, of which the predominantly agri-states Madhya Pradesh, Rajasthan and Chhattisgarh are currently ruled by the BJP. And in the 2019 general elections, the BJP will be forced to defend its 2014 majority. Hence, agriculture and allied industries will surely play a significant role in shaping the Budget.
Agriculture has been in deep crisis for some time now: The Central Statistics Office’s advance estimates for 2017-18 GDP growth show agriculture growing at 2.1 per cent in the current fiscal against 4.9 per cent during 2016-17.
Apart from the long-term structural issues ignored by all governments so far—fragmented land-holdings impairing productivity, constraints in the input (water, credit, seeds, fertilisers) supply chain, insufficient forward linkages, lack of market access, wastage—the current year has seen some additional low points. The Budget will focus on three areas in agriculture that will convince farmers to vote the BJP back.
Infrastructure: Weather reports showed that 2017 monsoons were bountiful, with a minor deficit. However, there were spatial disparities in distribution of rainfall. This affected kharif sowing in Uttar Pradesh, Haryana, Punjab and Madhya Pradesh with pockets of stress recorded in Maharashtra and Karnataka.
This affected output and consequently incomes. It also brought home the age-old problem of how the slow pace of irrigation—covering only 40 per cent of cultivable land—has made agriculture overly dependent on monsoons. With frequent droughts, this infrastructure deficit translates into lower crop and incomes.
For example, an October 2017 presentation from rating agency Crisil showed MP felt the highest stress, with deficient rainfall aggravated by poor irrigation infrastructure. It also singled out Rajasthan, MP and Chhattisgarh which showed a dip in profits earned per hectare during 2017. Jaitley may decide to increase the budget allocation for irrigation, having allotted lower amounts in the previous years. There also needs to be a review of the money spent on irrigation projects which are not being used to their potential.
Sliding prices: During 2017, the arbitrary market structures and policies yielded lower profits for farmers, even with losses in some areas. Loss of income due to sliding prices is critical to understanding farmer distress. This even prompted farmer organisations to request Jaitley to ensure some kind of assured income for farmers in the Budget. The story of declining farmer income is illustrative of the policy missteps by the government.
For example, faulty signals to farmers in the previous year, especially through higher minimum support price (MSP) for certain crops (pulses, for example) led to a bumper crop in 2017. But callous trade policy, especially regarding free imports, led to a glut. To top this, the government’s procurement target was inexplicably kept at a low percentage of the total harvest. Prices inevitably crashed well below MSP and farmers had to sell their crop at non-remunerative prices.
There is also the undeniable shadow of the trader community—the BJP’s traditional vote bank—looming over the Centre’s agriculture policy. The government’s MSP policy has been floundering for a while because of insufficient education leading to low levels of awareness among farmers, inaccessible procurement centres forcing farmers to sell to local traders for lesser prices (in many cases to the local moneylender) and graft in the official procurement system.
The Centre’s eNAM (electronic National Agriculture Market) which provides farmers a platform for selling their produce by linking them electronically with traders across the country is still a work in progress.
Policy Politics: In an open letter to Jaitley, Ajay Vir Jakhar, chairman of Punjab State Farmers’ Commission, has argued that the government’s policies must pivot from “Food Policy” to “Farmers’ Policy”. This is a major change in focus and would require complete overhauling of the farm policy. This suggestion also encapsulates within it the dilemma that confronts policymakers: Should they design policy to ensure food for all at all costs or ensure fair income-generation opportunities for farmers that will also lead to food security?
The policy framework should also examine how to deal with farm-related payments which are entangled in red tape. For example, the crop insurance programme—Pradhan Mantri Fasal Bima Yojana, launched in 2016—has drowned farmers in a sea of paperwork and failed to provide either adequate or timely compensation. The failure of this scheme has been cited as one reasons for Gujarat farmers, especially Saurashtra-based farmers, to change their voting preferences.
Jaitley’s earlier Budgets devoted many sections and paragraphs to the farm economy. However, many of these policies, schemes and announcements were seen as course corrections, tinkering with existing schemes or just plain grandstanding. February 1 should give him an opportunity to make some substantive changes in the farm sector.
Rajrishi Singhal
Independent consultant and former business journalist
Email: rajrishi.singhal@gmail. com