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SHIFT TO AGRO-RURAL ECONOMY

Budget After Poll

  

By Shivaji Sarkar

 

Gujarat elections are likely to change the focus of Indian economic policies. The last full Budget of the Narendra Modi government may have larger focus on the agro-rural economy. While farmers and rural economy is likely to get a better attention, cut in income-tax also cannot be ignored.

 

The rural-urban divide is now in sharp focus after these polls. The rural voters have swung to the Congress. The BJP has got 72 per cent of its lead from the urban seats and the Congress gets 89 per cent of leads from rural ones. It is interpreted as a clear discontent against their deteriorating economic conditions, falling prices of cotton, groundnut and other crops.

 

The government support to farmers is indirect largely through MSPs. No support is given for investment in crops. The farmers have to depend on loans or their own resources. Subsidies have been done away with except for some interest subvention.

 

At the same time, the phenomenon is not restricted to one State. It is an all-India phenomenon. Agricultural growth is an important driver of political fortunes in State elections. With eight States – Meghalaya, Mizoram, Nagaland, Tripura, Rajasthan, Madhya Pradesh, Chhattisgarh and Karnataka – slated to go for polls in 2018, policy changes are all the more necessary.

 

Interestingly, BJP parliamentarian Varun Gandhi in an article in September, three months before the Gujarat elections, has suggested a national discussion on rural distress. The Congress won 55 of the predominantly rural seats in Gujarat about 10 more than the BJP. But it appears that the BJP still enjoys the confidence of the people for the image of Prime Minister Narendra Modi — the belief that corruption could be tackled by him alone and that he is responsive to the people’s problems. And it has been seen that Surat traders protest but vote for BJP as the GST rates on 198 items is reduced.

 

Another significant aspect is the Muslim votes. The BJP is stated to have got about seven per cent more Muslim votes, now at 27 per cent; and Congress lost about six per cent, now at 64 per cent. The national Muslim politics is bound to change or look for new moorings as BJP does not woo them and the Congress ignores them. Sizeable number of Patidars chose to stay with BJP because of Modi. Most MLAs today are thankful to him more than their own popularity.

 

The shift in non-urban vote base is obvious. This is likely to change the budgetary focus. Finance Minister Arun Jaitley has indicated that the government will analyse and address the results in the Gujarat districts that highlighted farmers’ issues. Higher spending for the farmers is not unlikely.

 

Rural Gujarat saw better times under Modi’s administration. The average monthly per capita expenditure (MPCE) from the National Sample Survey Office (NSSO) shows that compound annual growth (CAGR) of MPCE in rural Gujarat was the highest under the period which broadly coincides with Modi’s tenure.

 

But during the past few years their income has come down to about Rs 7,000 a month more than the national average of Rs 6400. This is the crux of future politics. Modi says he would double farmer’s income by 2022 but that would be far less than the salaries of a government or factory worker or even an urban rag picker.

 

Not surprisingly, larger numbers of farm families are migrating to cities as they not only have lower income and higher input costs but also face cash crunch in the wake of demonetisation last year. Farmers almost everywhere in Bihar, Uttar Pradesh, MP, Maharashtra, Punjab, Andhra or West Bengal are not getting the bare minimum prices for their products, be it wheat, pulses or potato.  Potato wafers prices have skyrocketed but the farmer is not getting back even his input cost. The government owned NAFED is not making any purchase in States like Bihar owing to a dispute on sales tax with the State government since 2009.

 

The Planning Commission in 2011 estimated that the size of agricultural work force would shrink to less than 200 million (20 crore) by 2020. About 30.5 million left farming from 2004-05 to 2010-11 seeking employment in secondary and tertiary sectors – meaning lowly jobs

 

A Punjab University study showed that small — one to two hectare (ha) and marginal farmers — less than one ha, face a greater burden of debt. Over 50 per cent of the loans are from non-banking sources, mahajans (money lenders).  Average land holding size decreased from 2.3 ha in 1971 to 1.16 ha in 2011. A farmer now earns Rs 2400 for paddy per ha and Rs 2600 for wheat per ha. Worse, farm labourers earn less than Rs 5,000 a month.

 

But despite this 54 to 58 per cent people have direct or indirect employment in the farm sector – about 75 to 80 crore. All government policies since the first five-year plan typically are focused on weaning these people away to industry and other sectors. Sadly enough this has not succeeded as most labour intensive sectors have been highly automated, population increased and employment opportunities shrunk.

 

The Manmohanomics that is stated to have brought “reforms” have heaped woes on all kinds of workers. Real wages of industrial workers have not risen in proportion to those working in the organised government jobs. Large unemployment and social distress, often called jobless growth, has increased. Over 3.21 lakh farmers committed suicide in the last two decades, as a consequence of Manmohanomics.

 

It also saw continuous high inflation, except for 1998-2004, during the Prime Ministership of Atal Behari Vajpayee. Since 2010, inflation has risen by over 50 per cent eroding the wage gains as there has not been any change in income tax rates. The GST has increased prices. These reflect on lower purchasing power and consequent low growth.

 

The Modi government would have to present a drastically different budget as Agriculture Minister Radha Mohan Singh says the government will intensify farmer welfare schemes and ensure their effective implementation as well as the payment of MSP, which States are not paying.

This also needs to aim at higher government expenses and drastically change the economic policies and drift away from Manmohanomics. The government has to look into the pattern of direct subsidies paid by the US and other western countries to farmers.

 

The February Budget has to be a landmark for changing the course of the country, stem rural distress, plan for smart villages and direct government investment or subsidy in agriculture in tune with Deendayal Upadhyay’s integral humanism or Gandhian socialism. And, of course with an eye on 2019 General Elections. — INFA

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