When Indian economy has grown at an estimated rate of 6.7 per cent in FY-18, there shouldn’t be a cause for complain from any sector of the economy. But when the economy runs largely on one wheel – government expenditure – and the government hides behind the headline GDP number, the ground reality can be vastly different. One sector where unhappiness has turned into public anger is agriculture, though the BJP-led government’s recent media campaign on four years of its rule – ’48 months of transforming India’ – suggests that all is well with agriculture and the lives of farmers have been transformed for the better in the last four years.
But the reality is that farmers are an unhappy lot and have been expressing their grievances through frequent agitations. With the crisis in agriculture spilling out on to the streets, their anger is obvious. Over the last one year, massive protests have been seen across the country, starting with the Madhya Pradesh and Maharashtra agitations of the last summer, followed by the Kisan Long March from Nashik to Mumbai in March this year demanding a loan waiver, and the recent 10-day strike earlier this month that hit the supply of essentials like vegetables, fruits and milk to urban areas in the western and northern states of India. These protests clearly tell us that there is a full-blown crisis in agriculture.
That things aren’t right with agriculture sector was also admitted by Prime Minister Narendra Modi and finance minister Arun Jaitely a week before the Union budget in January. The finance minister had also indicated that top priority would be given to the rural sector in his budget. Responding to the farmers’ demands, the finance minister did announce in his budget speech minimum support price (MSP) at 1.5 times the cost of production. So, why are the farmers still angry and have not stopped agitating for their demands? The answer is quite simple: their incomes have been growing at a very slow rate.
Farmers have been demanding two things from the government: 50 per cent profitability over cost as promised and a complete loan-waiver. At every farmer agitation, an oft-repeated demand has been implementation of the recommendations of the M S Swaminathan Committee report. The key recommendation of the Commission was that the MSP be set up at comprehensive cost plus 50 per cent of the cost. This is called the C2 definition of production cost which includes imputed rent and interest on owned land and capital. The other two definitions are A2 (actual paid out cost) and A2+FL which includes imputed value for family labour. Therefore, MSP calculated by C2 formula is higher than A2+FL and A2.
However, the government in its budget on February 1 announced that MSP will be set up at A2+FL cost plus 50 per cent, which is 38 per cent lower than the cost calculated at C2. Therefore, according to the government formula, not only the MSP is misleading but there would not be any increase in the MSP for most crops. This is why farmers are agitating, while the government claims that it has already provided for increased MSP. Farmers also have a problem with the MSP regime. The reasons for their unhappiness are delay in payments, lack of infrastructure at procurement centres, distance to procurement centres and delayed announcement of MSP rates.
Farmers have frequently complained that prices in wholesale markets are often lower than the MSP set by the government. Since there are not enough procurement centres and the government starts its procuring process several days after the crop starts coming in, farmers are often forced to sale to traders in wholesale markets at lower prices than the MSP. Another problem with the MSP regime is that its benefits reach only a small segment of farmers as awareness about the MSP among farmers is very low. So, not only the MSP regime doesn’t work for majority of farmers but they lose the benefits of MSP. It is, therefore, surprising that the recent 10-day farmer strike was termed by the Union minister for agriculture and farmer welfare, Radha Mohan Singh, as a drama that was enacted to catch media attention, thus implying that there is no real reason for farmers to protest.
A closer look at data on rural economy suggests that rural India is doing well because it is the non-agriculture part of rural economy – forestry, livestock and fishing – which has grown faster than the agriculture part. The mistake people often make is to mix rural economy with agriculture and farming as the data for agriculture reported by ministry of statistics and programme implementation also includes data for forestry, livestock and fishing. Between 2011-12 and 2016-17, the non-agriculture part of the rural economy grew by 43.4 per cent, but growth in pure agriculture over the five-year period is quite depressing at just 5.2 per cent. This explains why the farmers are angry.
The major reason for frequent farmer agitations in different part of India is that farmers’ incomes have declined under the present BJP-led NDA regime. From 2004-05 to 2013-14, agriculture growth rose from 1.76 per cent per annum under the Vajpayee-led NDA rule to 3.84 per cent per annum under UPA. Farmers’ incomes also increased at the highest rate of more than 5 per cent under UPA since the beginning of reforms during this period. However, in the last four years, farmers’ real incomes have declined to 2.5 per cent as the agriculture GDP grew at a mere 2.5 per cent per annum, while the Indian economy grew at an average rate of 7.2 per cent. It is this below normal performance of agriculture that has been the cause of farmers’ protests.
Governments often resort to farm loan-waivers to pacify farmers. But loan-waiver is a knee-jerk reaction, often an immediate response to an emergency, and hence a temporary solution to avert a crisis. Loan-waivers also do not benefit small and marginal farmers – the most vulnerable segment in the farm sector – who have no access to institutional credit and, therefore, depend on local moneylenders. Therefore, the enduring solution to resolve agrarian distress and to ensure better prices for crops lies in political will to end the stranglehold of Agricultural Produce Marketing Committee over farming and overhauling of the antiquated agriculture marketing system. Another game-changer to increase farm incomes could be easier access to formal credit for marginal farmers.
A L I Chougule is an independent senior journalist.