Redressal of farmers woes need new economic thinking

Their impatience is running out. The remarkable resilience that farmers have demonstrated over the years in the face of growing stress, adversity and trauma is now beginning to break down. For almost a decade now, farmer’s real income stands frozen. Yes, you heard it right, frozen. A Niti Aayog paper has worked out that the real income of a cultivator has increased barely by 0.44 % every year over a five year period leading to 2015-16. In other words, farm incomes have stagnated. This was followed by the severe blow inflicted by demonetisation in 2016. The pressure to sell their produce at whatever price they are able to get resulted in an unprecedented crash in farm prices, forcing farmers to throw their produce onto the streets across the country. Tomatoes, potatoes and onions have been the worst hit. The impact is still lingering. For instance, an analysis published recently by Agrowon showed that by invariably buying at a distress price, Maharashtra farmers have been short changed to the tune of ₹ 2,579 crore for pulses and ₹769 crore for oilseeds this season. The story is the same everywhere. Just to illustrate, an interesting estimate done by Swaraj Abhiyan shows that farmers are likely to incur a loss of ₹325 crore in the case of barley. The modal price is ruling at 15 % less than the procurement price of ₹ 1,410 per quintal.

For chana, it has shown a dramatic fall of 30 to 38 per cent in the market prices in Madhya Pradesh, Chhattisgarh, Maharashtra and Gujarat when compared with the prices farmers received a year ago. In fact, despite the fanfare, the fact remains that none of the proposed 585 eNAM mandis have been able to buy from farmers at the MSP. The modal price that is being provided in the eNAM markets, which is based on the average price recorded in a day’s trading, is in reality a distress price. It certainly has been a bitter harvest. The terrible agrarian crisis that prevails has brought farmer’s anger to the fore. Over the year, farmers’ anger has spilled to the streets. Between 2014 and 2016, a period of two years, farmers’ protests across the country increased by a whopping 680 per cent. In 2016, the National Crime Record Bureau (NCRB) recorded 4,837 protests, roughly 14 protests a day.

Since then, the number and intensity of farmers’ protests have only multiplied. Unless the agrarian crisis is able to sway the electoral outcomes, I don’t think the political leadership will ever understand the severity of the socio-economic fallout. The dominant economic thinking is that agriculture has to be sacrificed to achieve economic growth. Agriculture therefore is being deliberately kept impoverished to keep the reforms viable. Former RBI Governor Raghuram Rajan has time and again iterated that the biggest reform would be when a sizeable percentage of population in agriculture is moved to the cities which are in need of cheaper labour.

This is what the World Bank had directed way back in 1996, seeking 400 million people to be moved out of the rural areas in the next 20 years, by 2015. Successive governments have merely followed the economic design. Left, Right or Centre, the underlying economic thinking remains the same. Keeping agriculture starved of public sector investments, and turning farming into an uneconomical enterprise was (and is still) considered to be the best way to push farmers out of agriculture. In such depressing times, agriculture needs to be reinvented. It needs a booster dose. More so considering that employment in the cities has been shrinking over the years. Since 2004-04, despite the high GDP growth rate, against the requirement of 1.25 crore jobs a year, only 1.6 crore jobs in the labour intensive industry have been created. In other words, against the expectation of 17.5 crore jobs, only 1.6 crore new jobs have come. Since the job market has dried up, common sense tells us that the challenge should be to make farming economically viable and ecologically sustainable. With 52 per cent population dependent on agriculture, almost 60 crore people, the emphasis should be on providing gainful employment in rural areas. This can only happen if the economic thinking shifts from creating an army of dehari mazdoor in the cities to rebuilding farming. It’s a question of priorities. The 7th Pay Commission is expected to benefit 45 lakh Central government employees and 50 lakh pensioners. The Union Finance Minister says it will cost an additional ₹1.02 lakh crore every year. But when implemented by state governments, PSUs and colleges across the country, Credit Suisse bank tells us that the additional burden will be around ₹ 4.5 lakh crore. This will benefit an estimated 1 to 2 % of the population, the salaried class. Surprisingly, no economist has ever asked where the money will come from nor has anyone raised the question of widening fiscal deficit. In fact, the industry calls it a booster dose since the additional money into the hands of employees is expected to create more demand. Imagine the demand that will be created from the rural areas if agriculture is to receive an annual additional budgetary provision of ₹ 4 lakh crore. Much of it should be in the form of direct income support and a higher MSP. This has to be accompanied by a mechanism of an assured monthly income package corresponding to the salary of the lowest government employee. Although economists will raise heckles of widening fiscal deficit and the elite is going to question the source of money, the fact remains that the huge demand created in the rural areas will propel the economy in a rocket dose. This is not only good politics, but also good economics.