Inadequate institutional credit
Meanwhile, the difficulties farmers face in
accessing credit at reasonable rates to finance agricultural production have become
more intense in the recent past. Institutional credit to agriculture did increase
under the United Progressive Alliance (UPA) government even though the increase
was not as much as expected or as would be necessary, and small cultivators
still found it difficult, if not impossible, to get loans. Recently, things got
worse in this regard, despite all the grand talk of financial inclusion under
the Jan Dhan scheme, as small farmers have once again been forced to take
recourse to local moneylenders and input dealers who charge exorbitant
interest. The rigidity of the institutional loan structure, as also the public
humiliation of defaulters by many commercial and cooperative banks, makes it difficult
to deal with even for farmers who can access such loans.
Meanwhile, the crisis in agriculture has been
sharpened by the lack of productive non-agricultural activities, including livestock
rearing and off-farm employment. The inadequate generation of properly
remunerative employment in the economy, which has been a shameful feature of
the recent growth process, has meant that farmers do not have the real choice
of engaging in other work even as cultivation becomes less profitable. This has
added to the insecurity created by the threat of involuntary displacement because
of the requirements of so-called “development”, and at least partly explains
the animosity among farmers to the Narendra Modi government’s Land Acquisition
Bill.
‘Shining India’ syndrome
All in all, suddenly the current conditions in rural
areas are harking back to the conditions that prevailed in the early 2000s, and
especially in 2004, when the devastation of agriculture and rural livelihoods
proved both economically painful and politically disastrous for the then-ruling
National Democratic Alliance (NDA) government. The similarities are both remarkable
and perplexing: the NDA government then chose to believe in its own propaganda
of “India Shining” and was punished in the elections for what seemed to be an
almost insulting denial of reality. Today, as farmers reel under a combination
of naturally caused problems and policy-driven adversities, the Narendra Modi
government is apparently planning a major publicity campaign to persuade the
people that the promised “achhe din” have already arrived for all Indians,
including farmers! During that period of what can only be considered extremely
depressed conditions in the rural economy, there was a growing recognition that
this reflected not only structural conditions but also, and especially, the collapse
of public institutions that affect farmers and farming.
UPA policy measures
The Congress-led UPA government promised to revive
agriculture, and several commissions, including the National Commission on
Farmers, provided detailed suggestions on how this could be done. It was evident
that to put agriculture on a more viable and sustainable footing, some policy
measures were urgently required in several interlinked areas. These included
the correction of spatial inequities in access to irrigation and working towards
sustainable water management; bringing all cultivators, including tenant
farmers, into the ambit of institutional credit; shifting policies to focus on
dryland farming through technology, extension, price and other incentives;
encouraging cheaper and more sustainable input use, with greater public
provision and regulation of private input supply and strong research and
extension support; protecting farmers from high volatility in output prices;
and placing emphasis on rural economic diversification to more value-added activities
and non-agricultural activities.
Of course, not all of these were even sought to be
implemented, and the same analysis of what needs to be done could be just as
relevant today. But the UPA government was elected on promises of reversing the
material decline in the countryside, and in its first five-year tenure it did
undertake a number of measures that were designed to improve things at least partially.
As it happens, most of the years of the UPA government turned out to be “achhe”
for farmers or, in any case, certainly better than the ravages of the early
2000s. Credit to agriculture increased manifold; public investment directed to the
rural areas also increased; agricultural research and extension services
(critical to ensure farmers’ access to current and relevant knowledge for
production) were given significant boosts through more public spending and
reorganisation; and, most of all, the rural employment guarantee Act (MGNREGA)
provided the rural poor a secure base of income that helped to revive the rural
economy through enhanced demand and entailed some activities that could improve
agricultural supply through the public works that were put in place. At the
same time, movements in world trade prices were also beneficial to farmers, and
so terms of trade shifts also assisted the relative improvement in farm
incomes. These measures did bear fruit by the end of the decade, with significant
increases in the volume of production of both food grains and non-food crops.
The value-added in agriculture also improved substantially, especially between
2009-10 and 2011-12, driven by both higher output and favourable relative price
changes. In consequence, investment in agriculture also increased, both in real
terms and as a share of agricultural income. But thereafter there was already
some indication of a tapering off of both production and value-added in
agriculture. Capital formation in agriculture increased substantially under the
UPA-1 regime and in the early years of UPA-2, driven in the later part of the
decade by private investment that responded to higher crop prices and more opportunities
for crop diversification as well as improved extension services.
Most recent period
has witnessed a sharp fall in capital investment in agriculture, according to
the New Series of National Accounts Statistics that has just been released. The
decline was especially sharp in the last two years of the UPA government. So,
in a sense, the rot, in terms of deceleration of agricultural performance, had
set in by then. Indeed, for many small and marginal farmers, especially in
dryland areas, even the “good years” of supposed agricultural boom did not
really translate into better material conditions.
It was this gap that Modi, as the prime ministerial
candidate of the NDA, exploited during the course of the 2014 general election.
In his campaign speeches, he promised to ensure that farmers would get a 50 per
cent return on their input costs; that agricultural prices would be stabilised
and kept on a higher trajectory for cultivators even as urban consumers would pay
lower prices because of improved distribution; that rural people would be able
to access affordable and good quality health services; and many other things
besides. After having their hopes raised sky-high by such promises, it is not surprising
that farmers feel betrayed by this government. Even the Land Bill, unpopular as
it is, is only one of many grievances that cultivators now nurse against
official policies because of many acts of commission and omission that have led
to dramatically deteriorating conditions of cultivation.
In the first year of the Modi government, the
Central Statistics Office’s (CSO) advance estimates of national income suggest that
growth of value-added in agriculture will be only 1 per cent compared with 3.7
per cent in the previous year. But even this may well be an overestimate given
the damage to the rabi crop because of freak weather conditions. Instead of
higher crop prices, farmers had to face declining global trade prices of most
cash crops and a near-stagnant minimum support price (MSP) for important
foodgrains and sugarcane. In addition, the Central government has now declared
that it will procure crops only from farmers in deficit States, a peculiar
strategy that will defeat the original purpose of moving grains from surplus to
deficit areas and will expose farmers in all other places to the vagaries of
market price fluctuations and declines. It has told State governments that wish
to top up the MSP on offer to their own farmers that they will then have to foot
the entire bill for such purchase rather than only the difference between their
own price and the Centre’s price.
With falling oil prices, domestic oil and diesel
prices should have come down sharply, thus benefiting farmers, but this has barely
occurred because the benefits were mostly garnered by the government instead,
which took advantage of the global price fall to raise its own excise duties
and sales taxes. Fertilizer subsidies are planned to be cut, and the
policy-created imbalance between use of nitrogenous and phosphatic fertilizers
will worsen, with associated terrible effects on future soil quality and yield.
To add injury to all this insult, the past year has
experienced sweeping cuts in some essential items of Central government expenditure
that impact farmers directly. Public spending on agricultural development and
on research and extension has already fallen in real terms and is set to
decline even further in the coming year. The money for irrigation has been cut.
Central government spending on health and other services which would reduce the
financial burden on farmers is also being cut severely. The employment
guarantee scheme has been squeezed so much that it is no longer any kind of
guarantee at all, and the programme will struggle simply to survive. Those who
feel that this will not affect farmers because they employ workers rather than
the other way around miss the point that around 40 per cent of cultivators
joined the programme as wage labour to supplement their meagre and uncertain
farm incomes. So, reducing or killing this programme will also affect them very
badly, and that too at a time when other sources of rural income are drying up.
This is the context in which the unseasonal rain and other weather changes have
had such a devastating impact on so many farmers. Even in this punishing
context, government responses have been at best tardy and at worst downright
offensive.
The Central government is effectively treating this
as the responsibility of State governments, passing the buck on this critical
area of public intervention to States that are already hugely financially
stretched because of the reduction of so much other Central social spending. It
is hard to understand why the Modi government is persisting with such blatantly
anti-farmer policies. It is even harder to understand how it can presume that
periodic radio broadcasts by the Prime Minister and optimistic media blitzes
can somehow change public and farmer perceptions when the experienced reality
is so very different from both the promises
END.(Published in Frontline.in)
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