Focus on agriculture, farm income in budget?

THE steep fall in farm sector growth this year not only highlights the disconnect between policies and ground reality, but also calls for short term and long-term measures as a response to the distress.

Growth can be just a number if it does not benefit all sections of population. It also becomes meaningless if, in a growing economy, the gains of growth do not reach 47 per cent of the workforce engaged in agriculture. This is precisely the case with agriculture in India and those dependent on it for their livelihood. Acknowledging farm distress, Prime Minister Narendra Modi in an interview with a broadcast news channel on Sunday, said it was the responsibility of the centre and the state governments to identify and address farmers’ issues. That something is wrong with the rural sector which should be accorded top priority was also admitted by Finance Minister Arun Jaitley last week.

Speaking at an event ahead of the budget, Jaitley said that India is one of the fastest growing economies in the world and the growth is benefiting people in different sectors. “But maximum population is dependent on agriculture sector and unless the gains are clear and evident, the growth is not justifiable and equitable,” he added. He also indicated that his government’s concern over stress in the farm sector will find reflection in his budget on February 1. Jaitely’s fifth budget – before the upcoming seven state elections this year and general elections in the first half of 2019, therefore, assumes significance – is expected to have a rural focus with over-spending on rural infrastructure, agriculture and job schemes to boost rural income. The point that distress in farm sector needs urgent attention has been driven home by several rounds of agitations by farmers across several states demanding farm loan waiver, lower input costs and fair price for agriculture produce in the last few years.

Low growth, high input costs, poor returns and distress behaviour such as disproportionally high rate of suicides by farmers are definite signs of things going wrong for India’s agriculture economy. Apart from their immediate demands, what the farmers have essentially been questioning is the government’s policies underlying the neglect of the farm sector. It goes without saying that, apart from natural factors, viability of crop production is also eroded by policies. This has been the case, according to experts, in the post-reform era, as policy shifts have not been in favour of agriculture, while liberalisation and deregulation of economy has unleashed growth in many other sectors.

A look at data on growth in the farm sector over the last four years suggests that agriculture has not been a priority sector for the government. According to advance estimates of GDP growth for 2017-18 by the Central Statistics Office (CSO), economic growth is expected to hit a four-year low of 6.5 per cent – the lowest under the Modi government – mainly due to poor performance of agriculture and manufacturing.  The CSO’s estimate of the agriculture and allied sector growth for the current fiscal is pegged at 2.1 per cent, against 4.9 per cent in the last fiscal year.

The steep fall in farm sector growth this year not only highlights the disconnect between policies and ground reality, but also calls for short term and long-term measures as a response to the distress. In the four years of Modi government (based on CSO’s advance estimates for the current fiscal), the agricultural GDP growth has been 1.9 per cent against the overall GDP growth of 7.2 per cent. Both are significantly below when compared with the first four-year performance of UPA-1: 3.8 per cent and 8.9 per cent, respectively. In the 10 years of UPA rule between 2004-05 and 2013-14, agriculture growth was registered at the rate of 3.7 per cent, while the overall GDP growth rate was 7.9 per cent.

Going back to 1991-92 when the economic reforms began, agriculture GDP grew at the rate of 2.4 per cent, against the overall GDP growth of 5.2 per cent during the Congress rule under P V Narasimha Rao from 1991 to 1995-96. Under the Vajpayee period from 1998-99 to 2003-04, the overall GDP growth recorded was 6 per cent, while farm GDP was 2.9 per cent. Clearly, performance of the Modi government is not only lagging behind all previous governments since 1991, but agriculture has taken a big hit, leading to suicides and sporadic farmer agitations. With one more year to go for the next general elections, it is unlikely that agriculture growth will register a significant improvement to finish at a decent five-year average.

According to the World Development Report of 2008, growth in agriculture is at least two to three times more efficient in reducing poverty than the same quantum of growth in non-agricultural sectors. Over the last six decades, agricultural production has increased at an average annual rate of 2.5 to 3 per cent. Till the 80s, India’s mixed economy delivered GDP growth rate between 3 and 4 per cent.  Liberalisation of economy led to doubling of GDP growth; between 2006 and 2008, growth had even accelerated to over 9 per cent mark annually. Until 2015, India was the second fastest growing economy in the world; currently it is being billed as the fastest growing major economy. However, much of this growth is not reflected in agriculture which remains the main livelihood for more than 50 per cent of the population.

Much of India’s growth in the post-reform period has come from the service sector, which contributes 53 per cent to the national economy.  While the industrial sector has recorded marginal growth of around 5 per cent in 25 years, agriculture currently contributes only 15 per cent to the GDP, down from 29 per cent in 1991. As the economy matures, the share of agriculture is bound to come down gradually, but growth in agriculture has lagged behind many other sectors of the economy. Barring a few exceptional years, growth in agriculture and allied sector in the post-reform period from 1990-91 to 2013-14 has been recorded at 3.2 per cent, lower than the 4 per cent target set by the government. As a result, farmers’ real income has remained stagnant.

The current government’s oft-repeated goal in the last few years has been doubling of farmers’ income by 2022-23. That’s an ambitious target which requires massive public investment in agriculture to raise productivity, as doubling farm output is equally important to increase farmers’ income. It also requires political will to reform land policies and raise remunerative prices, a major demand of agitating farmers in the last few years. If agriculture is not accorded a top priority both by the central and state governments through a mixture of policy action and investment, it will continue to stagnate at the base of the pyramid of Indian economy.

The writer is an independent senior journalist.

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