‘Ease of doing Agriculture’ is the way forward

It was in 2013, when just prior to the inauguration of the annual World Economic Forum (WEF) jamboree at Davos in Switzerland, Oxfam released its annual global inequality report.

Estimating that the richest 100 families in the world had added $ 240 billion to their wealth in a year, the report said the amount of wealth concentrated in the hands of top 100 was good enough to wipe out global poverty four times over. If only that report had been heard and action taken to reduce global poverty, the widening inequality could have been contained.

It was in 2013, when just prior to the inauguration of the annual World Economic Forum (WEF) jamboree at Davos in Switzerland, Oxfam released its annual global inequality report.

Estimating that the richest 100 families in the world had added $ 240 billion to their wealth in a year, the report said the amount of wealth concentrated in the hands of top 100 was good enough to wipe out global poverty four times over. If only that report had been heard and action taken to reduce global poverty, the widening inequality could have been contained.

Coming at a time when all eyes are on Budget 2020, it will be interesting to see whether Union Finance Minister Nirmala Sitharaman will make an attempt to correct this historical distortion in economic approach.

With growth hitting an 11-year low and that too on the back of an economic slowdown, and with big business drumming up fears of fiscal slippage, if she resorts to increased government spending so as to spur rural demand, I doubt if the credit rating agencies and the economists working with brokering agencies will allow for any policy space to be utilised for bridging the widening inequality.

Already, enough noise is being created in the mainline media warning against any fiscal exuberance, suggesting big-bang measures which harbours on more of the same and therefore keep fiscal deficit within the target proposed.

At a time when fall in consumption and investment are being considered as the reasons behind the economic slowdown, any meaningful attempt to enhance rural spending will come from providing more income in the hands of the rural poor which will also go a long way in addressing growing inequality.

Regardless of what credit rating agencies have been suggesting, the Union Finance Minister will have to defy the contours of the predominant economic thinking that has pushed the economy on a downhill slide. An economy which caters to serving the consumption needs of 10 per cent of the population must now look beyond, and as the Prime Minister often says, translate into Sabka Saath, Sabka Vikas.

In other words, Budget 2020 provides a perfect opportunity to set the economic imbalance right.

Regardless of what credit rating agencies have been suggesting, the Union Finance Minister will have to defy the contours of the predominant economic thinking that has pushed the economy on a downhill slide. An economy which caters to serving the consumption needs of 10 per cent of the population must now look beyond, and as the Prime Minister often says, translate into Sabka Saath, Sabka Vikas.

In other words, Budget 2020 provides a perfect opportunity to set the economic imbalance right.

On the other hand, I have always argued that unless growth is inclusive, the economic benefits will not reach the masses. Considering that bulk of the rural poor comprises farmers and farm workers, the focus has to therefore shift to agriculture.

Of the 95.3 crore Indians that the Oxfam report talked about, at least 60 crores are engaged directly or indirectly with farming. The first and foremost step is to start viewing agriculture as part of the formal economy. Agriculture should not only be seen as a sector whose only contribution is to ensure that food inflation does not cross the four per cent (plus or minus two per cent) limit as laid down under the Reserve Bank of India (RBI) macro-economic policy, but should be seen as a sector that can create economic buoyancy. More so, at a time when the bottom 60 per cent population holds only 4.8 per cent of the national wealth.

This is because agriculture unfortunately has been kept deliberately impoverished so as to keep economic reforms thriving as a result of which agrarian distress remains highly pronounced.

According to the Economic Survey 2016, a report that I have often quoted, the average farm income in 17 states of India stands at a paltry Rs 20,000 a year. In other words, farming families in roughly half the country survive on less than Rs 1,700 a month. At such low incomes, the share of agriculture in country’s GDP is bound to remain low.

The IMF says that declining rural demand has pulled down India’s growth, which in turn has pulled down global GDP. This became known to IMF (and for that matter to mainline economists) only when India’s GDP growth figures slipped down to less than 5 per cent.

But even for the past two decades, farm incomes had either remained stagnant or were in the negative, which means rural spending was already low. This fact was never acknowledged.

An OECD-ICRIER study for the period between 2000 and 2016-17 shows that Indian farmers had lost Rs 45 lakh crore on account of being denied the rightful price. This was followed by a period when, according to Niti Aayog, annual growth in real farm incomes had remained at ‘near zero’. However, not even an iota of concern was exhibited by the World Bank/IMF, the credit rating agencies or India’s mainline economists at the extra-ordinary crisis that prevailed in rural India. As long as GDP hovered at 6 per cent and above, economists failed to see the slump in rural demand.

The launch of PM-Kisan scheme in last year’s Budget, providing a direct income support of Rs 6,000 per year per farm family (owning land), for which a budgetary provision of Rs 75,000-crore was made, was a ‘tectonic’ shift in economic thinking.

As someone who had relentlessly been seeking an income transfer to the farming community, to partly offset the economic loss farmers have been undergoing year after year, I think PM-Kisan was the right vehicle coming at the right time to increase rural incomes. There is no other policy instrument that can reach all farmers.

To make a meaningful impact, my suggestion to the Union Finance Minister would be to provide an economic stimulus package of Rs 1.5 lakh crore, over and above the Rs 75,000-crore that is already allocated under the PM-Kisan scheme. This would provide an amount of Rs 18,000 every year or Rs 1,500 per month (against Rs 500 at present) which is enough to meet some farm expenses like cost of seed, manure and bio-pesticides. This may not sound much to those living in the cities but imagine the implications it has for the rural poor whose income is hovering around Rs 20,000 per year. In any case, the additional allocation under PM-Kisan scheme will flow back into the markets by way of enhanced consumer demand.

An effort should also be made to ensure 100 per cent implementation of this scheme. At present, against a total of 14.5 crore farmers, only about 7.6 crore farmers have been covered till November 30. Also, the Finance Minister should expand this scheme to benefit tenant farmers.

When farm incomes are low, it has negative fallout on farm workers. According to a study by the Centre for Monitoring Economy (CMIE), in the past one year, 2018-19, almost 1.1 crore people lost their jobs. An “estimated 91 lakh jobs were lost in rural India, while the loss in urban India was 18 lakh jobs.

“Rural India accounts for two-thirds of India’s population but it accounted for 84 per cent of the job losses,” the report said.

Several other studies have shown farm wages declining to its lowest in past five years, and massive job losses being faced by both farm and non-farm workforce.

Even the MGNREGA scheme, for which a budgetary provision of Rs 61,084 crore was made under revised estimates for the 2019 fiscal, numerous reports of payments not being made in time have appeared. To bring the economy back on track, my second suggestion would be to enhance MNREGA budgetary allocation by another Rs 10,000 crore, taking it to Rs 70,000 crore for fiscal 2020.

While the Rs-25,000-crore corpus for last-mile funding for stalled housing projects may help the construction industry, another stimulus of Rs 25,000 crore is needed to prop up the Zero Budget Natural Farming (ZBNF) initiative that the Union Finance Minister had mentioned in last year’s budget but refrained from making any budgetary provisions.

Drawing from the successful reach of the ZBNF programme in Andhra Pradesh, where approximately 5.85 lakh farmers have been shifted from chemical farming systems, it is time to replicate organic cultivation in erstwhile Green Revolution areas, which are faced with severe crisis in groundwater depletion as well as environmental contamination.

In addition, an allocation of Rs 500 crore also be made to set up Farmer Markets in major urban centres. This should be to encourage the supply of chemical free farm produce to the health-conscious urban population.

And finally, I expect the Union Finance Minister to launch an Ease of Doing Farming initiative on the lines of ease of doing business. After all, if 7,000 steps for ease of doing business can be laid out for the industrial sector, agriculture too needs it desperately.

At every step, linked to production and marketing, a farmer faces obstacles that are primarily because of lack of governance. This will go a long way in making agriculture an economically viable and environmentally sound enterprise. A vibrant agriculture will create so much of demand that the wheels of development will never be faced with a slowdown.

Try it, to experience it.

(This article was written before Budget 2020 was presented)