Long-term solution to farm distress needed

The opposition of farmers to the Narendra Modi government is not very surprising. The increasing resort to agitation, leading to massive farmers’ rallies in the national capital in recent weeks, may have been a major factor that led to the fall of the BJP governments in the Madhya Pradesh, Rajasthan and Chhattisgarh Assembly elections. The distress in Indian agriculture was one of the many reasons that led to the defeat of these governments. It was the result not only of incompetence but reflects the low priority given to rural voters and their needs in favour of urban residents and foreign suppliers.

The neglect of the rural economy is evident in the low growth there in the last four years. The growth of the agricultural sector has been erratic — it grew slowly in the 1960s and then picked up after the Green Revolution pushed up growth in the next decade. During the next 20 years of high growth in the economy, agriculture stagnated, only to pick up again in 2004. In 2004-14 the country’s agricultural sector witnessed its highest-ever growth phase, of around four per cent per year, compared to the low growth of just 1.9 per cent in the four years of the Narendra Modi government.

There have been several factors that have contributed to this low agricultural growth. Low investment in irrigation and modern techniques, insufficient development of agricultural markets, not giving adequate minimum support price (MSP) for purchases from farmers, not developing exports and bringing down prices by cheap imports, cutting down on support schemes like NREGA, the reluctance to write off farmers’ loans, disrupting the milk economy by violent agitations on the sale and movement of cattle, and concentrating on big investments in manufacturing and distribution.

Farmers contend that while the input prices that they have to pay have increased substantially, the MSP does not reflect these changes. For instance, fuel prices have gone up 25 per cent, fertilisers up by 20 per cent and the rental of farm equipment by another 20 per cent. Though the MSP is fixed at cost plus 50 per cent, it does not take into account all the costs, including family labour and the cost of land, and is less than routine annual increase in MSP. The farmers’ agitation seeking MSP for all crops and farm produce has been on for over a year. The other major demand is to write off loans, which eventually lead to a debt trap, which then leads to many farmers to lose their land. (Some of them subsequently even commit suicide.) But to write off their debt also increases the stress on the already-faltering banking system. In the past year, several large states announced loan waivers that together amount to `1.82 lakh crores. When the remaining states are also likely to be added in this list, it may take the total loan waiver sum to more than `4 lakh crores.

This may be politically expedient, but in the long run it will not be feasible. Around the same sum is needed every year for long-term measures to improve farm productivity through irrigation, better cropping practices, better storage, agro-industry and village-level infrastructure, including computers and the Internet. The problem is that neither is the Narendra Modi government investing in building productive assets in agriculture, nor is it accepting the farmers’ demands for writing off their loans, especially when big industry is allowed to write off most of its bad loans.

One way out of the agricultural mess is the example offered by Telangana and Andhra Pradesh. Under Telangana’s Rythu Bandhu scheme, the government gives `4,000 per acre as support to farmers before every sowing season for money to buy seeds, fertilisers and pesticides, rather than forcing then to borrow from informal sources at exorbitant interest rates. The state has an outlay of `12,000 crores for this scheme, which is a little less than seven per cent of its budget. This scheme has prevented the state’s farmers from falling into the debt trap. The value of this initiative was a major reason for the TRS under K. Chandrasekhar Rao doing so well in the recent Assembly elections.

Ever since the BJP government came to power at the Centre four years ago, the increasing restrictions on trade in cattle have been detrimental to rural incomes. The right-wing vigilantes from the RSS, Bajrang Dal and the BJP made trading in cattle difficult across all northern states by attacking farmers and traders, and this led to a rise in the agrarian crisis. India, with a milk production of 165 million tonnes, is the largest producer in the world — the value of milk is more than that of rice and wheat combined, it is a source of income to small and landless agro-households, and 70 per cent of those earning their livelihood from milk are women. Old or dead cattle are the mainstay of the leather industry. But due to the attacks by right-wing vigilantes, the livestock trade has crashed, with prices down and milk production falling.

Another reason for the farm crisis is falling prices due to the slowdown in exports and the growing momentum of imports. While this does please the urban middle class, it poses an additional burden to all those who depend on an agricultural income. Whenever imports of agricultural produce take place, it lowers income for the Indian farmer and transfers it to farmers outside the country. Agricultural imports were around `30,000 crores, and increased to `90,000 crores in 2013-14, the last year of the UPA-2 government, and further rose to `150,000 crores in 2015-16.

At the same time, while exports went up initially, they have dropped since the NDA came to power at the Centre in 2014. The export of agricultural produce recorded more than five times the growth during 2004-2014 — from `50,000 crores to `260,000 crores, but then dipped to `210,000 crores in 2015-16. Importing wheat is like outsourcing agriculture, and importing unemployment.

The country’s agrarian imports have been consistently rising over the past decade, and money spent on imports is money taken away from Indian farmers. This is particularly so for edible oil and pulses, which have become major imports.