The fact that Indian agriculture is under considerable stress, and has been so for quite some time, is generally well acknowledged. As the latest Economic Survey presented a couple of days prior to the Union Budget noted; “In the last four years, the level of real agricultural GDP and real agricultural revenues has remained constant. The government’s laudable objective of addressing agricultural stress and doubling farmer’s income requires radical follow up action”. As it happens there is a huge literature on the crisis in India’s countryside and it is not my objective here to get into a discussion of its several dimensions as well as the underlying causes.
However, to stress the enormity of the challenge, I would like to cite one or two figures. As per one of the most recent and credible official large scale surveys from the National Sample Survey Organisation (NSSO) titled Situation Assessment of Agricultural Households in India (2014), which was a countrywide survey of approximately 35000 households during 2012 and 2013, well over half of agricultural households in the country were indebted and the average volume of debt increased almost four fold between 2003 and 2013. It is also worth noting that the average level of debt per agricultural household in the country was Rs. 47000 while income from cultivation per household was approximately Rs. 37000. In other words the average debt of an average household was approximately Rs. 10000. Along with the high incidence of indebtedness, stagnant income etc. the other extremely disturbing feature which again is well acknowledged is that of suicide by farmers which has crossed over 320 thousand between 1995 and 2015. In other words, as already stated at the outset, a prolonged situation of agrarian distress, if not crisis, from the early 1990s to the present is hardly in doubt. Furthermore there is near consensus that this distress has much to do with the overall macroeconomic policy regime pursued in the neoliberal era. In this brief note I do not wish to examine further the nature or the causes of aforementioned distress and my focus is on the Union Budget 2018-19 and its implications for agriculture.
Soon after the latest Union Budget was presented in the parliament several commentators swallowed hook, line and sinker, the claim of the Finance Minister that the proposed budget has tried to address the challenges of rural India, in particular agriculture. This is supposed to be achieved through a set of promises and proposed programmes and schemes; prominent among these are the proposal to increase institutional credit to agriculture from Rs. 10 lakh crore in the current fiscal, to Rs. 11 lakh crore in the coming financial year, and a hike in the minimum support price (MSP) to meet the benchmark of production costs plus fifty percent. As regards the proposed allocation for the Department of Agriculture, Cooperation and Farmers Welfare there has been a 7 percent increase in nominal terms in comparison with the current fiscal. Without getting into several other minor announcements in the proposed budget it may be useful to examine the above noted measures and promises.
Let us first take the issue of the promised MSP. During its election campaign as well as its Manifesto before the 2014 parliamentary election, the BJP routinely referred to the well-known Farmer’s Commission Report which had been produced under the academic leadership of Dr. M.S. Swaminathan. It was promised that if the NDA came to power then farmers would be paid MSP which is cost plus fifty percent. As it happens, in official documents such as Committee of Agricultural Costs and Prices (CACP) reports, there are two broad concepts of Cost: the so called Cost A2 consists of all expenses for various inputs paid by the farmer in cash or kind (e.g. seed, fertiliser, hired labour, cost of machine etc.) plus rental cost for leased-in land, depreciation cost of assets, interest on the working capital etc. Cost C2 includes Cost A2 plus the imputed value of family labour, the rental value of owned land and the interest on fixed capital. Given that the Finance Minister did not quite spell out the exact meaning of ‘Cost of Production’ but went ahead to promise a fifty percent margin on ‘Costs’ there is an obvious ambiguity which needs to be clarified at the earliest. Furthermore, it is also worth noting that the Finance Minister claimed that the peasants had already been given an MSP in the Rabi season which had already taken into account fifty percent above the Cost. Going by the official estimates of Costs by CACP or the Food Corporation of India (FCI) it clearly emerges that the MSP received by farmers in the last Rabi season was substantially less than the economic costs reported by these agencies. It is also important to recall the well acknowledged point that the coverage of the MSP is quite limited, both in terms of crops and the number of farmers. In short, supposedly the most important measure to address farmer’s distress appears to be quite vacuous going by the above noted elementary considerations.
In any case, a promise can be taken seriously only if backed by adequate allocations. In this respect it would appear that the assurance of ‘Cost plus fifty percent MSP’ has very little to do with the proposed allocations. Compared to the revised estimate for the 2017-18, as noted above, there is only a 7 percent increase in nominal terms for Agriculture for 2018-19; this also means that there is an actual decline in allocation for Agriculture relative to the expected nominal increase in GDP. It remains a mystery where will the resources come from to back up the promised pro-farmer bias in this budget.
As regards the third prominent proposal regarding expansion of credit (from Rs. 10 lakh crore to Rs. 11 lakh crore) the first obvious point to highlight is that it is a matter which has nothing to do with the budget; rather it is an issue pertinent to the larger policy architecture of the ‘priority sector norms’ of bank lending. Furthermore, given the definitional changes in what constitutes ‘priority sector lending’ for agriculture in the recent years, it remains quite uncertain how much of the credit flow will finally land up with the farmers.
Given the above, the claim of ‘pro-farmer’ bias in the Union Budget would appear to be on a slippery terrain. Even if there is significant implementation of the promises made, the nature of the agrarian crisis is such that these measures are hardly adequate. In other words, even if the intent of the Government is an honest one, it appears, at best to be in a state of delusion (that these measures can address the crisis in the countryside, double the income of the farmers by 2022 etc.). Looking at the figures of allocation under the much hyped programmes and schemes for Agriculture, clearly the Union Budget seems more like deceit and deception. If the Government has to get serious about the much talked ‘ease of living’ for the masses in the country, whether in agriculture or outside it, it has to confront the challenge of adequate resource mobilisation and expenditure headlong. Going by the estimates of increase in expenditure for 2018-19 over the current fiscal, which is only 10 percent in nominal terms, i.e. even below the estimated nominal increase in the GDP, it is a mystery what all the hype is about.