Tackling farm distress
The core of NDA’s final budget will emphasise on rejuvenating the agricultural sector and creating fresh employment opportunities,
With the presentation of the fifth budget of the Narendra Modi government now only a fortnight away, the policy option at the highest level of the government has zeroed in on providing a big stress on the removal of farm distress in the 2018-19 budget proposals. Prime Minister Narendra Modi, who is supervising the direction of the last full budget of his present NDA regime before the Lok Sabha elections in April/May 2019, has given strict instructions to the officials that the speedy removal of the farm distress and the immediate measures to generate jobs for the youth have to be the two pillars of the 2018-19 budget strategy. In the process, the government will organise more public investments without waiting for the domestic private investment to pick up.
Arun Jaitley is very firm on maintaining the fiscal deficit target in the 2018-19 budget also and he has been advised that in the present slowdown scenario of the economy, it will be better to spend more for pepping up growth even if that crosses the fiscal target a bit. There is political pressure from the BJP cadres at the grassroots level and the RSS for the immediate creation of jobs for the youth and at the PMO also, the policymakers are not averse to spending more in the next fiscal to ensure increased benefits to the ruling party in the ensuing assembly elections in 2018. The strategy sessions held by both the BJP leadership and the PMO have mentioned that improving the prevalent farm conditions is the key to economic growth in the next fiscal and if the Government fails in ensuring buoyancy in agriculture, its adverse impact will politically hurt the BJP in both assembly elections and the Lok Sabha elections in the coming year.
The CSO data of the Government has projected the agricultural growth at 2.1 per cent in the current fiscal as against 4.9 per cent in 2016-17. This slowdown led to serious farm distress as was evident from the farmers' agitations in different states last year. This slow growth has led the CSO to peg the GDP growth target in 2017-18 at 6.5 per cent, the lowest in the last four years.
The Modi Government claimed before the demonetisation in November 2016 that the crisis and disruption would not trickle down to the next financial year, but present data shows that the crisis has continued and the disruption which took place in the informal sector following demonetisation, has led to not only job losses in the rural areas but also led to substantial reduction in rural income leading to the accentuation of distress. The officials though have been engaged in mitigating damage management and the farm strategy is taking care of the problems faced by the rural people affected by this disruption in the post demonetisation era.
Prime Minister Narendra Modi has been talking of doubling farmers income by 2022 and as a part of that, the advance action will be taken in the 2018-19 budget. Already the government has with it the recommendations of a top-level official panel which has gone into the present plight of the farmers and suggested measures to make agriculture more profitable so that farmers' income can be doubled in the next five years. This panel has suggested the adoption of a liberalised land leasing policy to recognise tenant farmers, contract farming, freeing up of agricultural markets and strengthening decentralised procurement of crops by the states.
The panel has provided a major stress on improving the marketing network to help the farmers. With the goal of transforming agriculture into profitable agri-businesses, the panel has suggested revamping of the marketing division of the agriculture ministry into a division of marketing agri-logistics and upgrading the Rashtriya Krishi Vikas Yojana into a division on investments in agriculture to promote investments in agriculture production and post-production facilities.
A major recommendation is the change in the definition of the farmer to include cultivators, lease farmers and sharecroppers. This change in definition is expected to help the cultivators and a large number of sharecroppers in receiving access to the support system and finances to move on their own. The panel's analysis shows that to achieve a desired 10.4 per cent annual rise in real farm income, capital investments by the private and the public sectors need to grow at 12.5 per cent and 16.8 per cent respectively per year for seven years between 2015-16 and 2022-23. This means that there must be an increase in private and public investments from Rs 1.78 trillion in 2015-16 to a staggering Rs 4.86 trillion in 2022-23, calculated at 2015-16 prices.
This is a gigantic task and for organising this kind of investment in agriculture, extensive reforms have to be undertaken. The Prime Minister has talked extensively about the target of doubling farm income, but the Government has so forth not displayed the political and administrative will to create the necessary environment for achieving that. The social tensions in rural areas due to divisive policies have also contributed to the fall in agricultural production. How far the Prime Minister and his team can go to adopt policies for transforming Indian agriculture through the 2018-19 budget that has to be seen. That way the last full budget of the NDA regime, is crucial for the future of Indian agriculture.
(The author is Editor-in-Chief, IPA. The views expressed are strictly personal.)