Narendra Modi may have successfully steered his National Democratic Alliance (NDA) to a thumping victory in the recently concluded parliamentary election in India but he still needs to deliver on the agrarian front. The ongoing agrarian crisis in India found little mention in the BJP's election campaign. However, the massive mandate that has gone in favour of Modi brings a surge in expectations from the country’s electorate of which a sizeable number are farmers.
The new government cannot simply wish away the drought situation that is presently prevailing in around 40% of the country. It has to intervene decisively to mitigate this crisis. As of 2018, less than 50% of the net sown area in India has access to irrigation. The rest is left to the vagaries of nature. The government must look to increase the scope of irrigation in India and increase the reach of micro-irrigation.
Additionally, the government must ensure price rectification for agriculturists. Low prices for most crops in the last four years were caused by demonetisation and by the global downturn of prices. Private trade is reluctant to stock commodities as it sees little chance of rise in prices. In 2018-19, as a result of drought, India had to import cotton and maize. In the present fiscal, if the weather turns hostile, there might be the need to import other agrarian products, which may be linked to an increase in prices of pulses and other necessary food items.
The NDA government had announced an increase in Minimum Support Prices (MSP) to 50% above the cost of production for 13 summer crops for the 2018-19 fiscal. Modi had dubbed this decision as ‘historic’. However, there is a significant variance between what the government considers as the cost of production and what the farmer actually incurs. According to the Indian government, production cost is equal to actual expenses on seeds, fertilisers, and irrigation added to unpaid family labour. But for many agrarian economists, actual production cost is equal to actual expenses on seeds, fertilisers, irrigation, added to unpaid family labour and rentals or interest on land. Yogendra Yadav, President, Swaraj India and Founder, Jai Kisan Andolan, has said that the MSP rate declared by the NDA government was not what had been promised by them prior to the 2014 election. The new government must look to increase the ambit of MSP, to include more crops and also enhance it qualitatively.
The NDA government has committed `75,000 crore for its PM-Kisan scheme. However, according to various stake-holders, this amount - even if utilised optimally - may not be sufficient to mitigate the present agrarian crisis. The chance of increasing public expenditure in agriculture is practically non-existent, with a slowing economy and a related dip in revenue projections.
The government must encourage institutionalised agrarian credit mechanisms by substituting non-institutional sources like money lenders, traders, and agents. Apart from increasing the penetration of the rural banking system, the government must strengthen cooperative societies to emerge as credible sources of agrarian credit.
According to the draft report of the Committee on Doubling Farmers’ Income headed by Ashok Dalwai, CEO of the National Rainfed Authority, “The per hectare real value of output increased for most crops during the period 2004-05 to 2013-14, but the rise in input cost was much higher than the increase in the value of the output. This resulted in lower net income from the cultivation of most crops.” The new government must control the prices of agricultural inputs to rescue the agricultural sector.
There is need to renew emphasis on cash crops in India. Tea needs to be promoted because of its high export potential. In 2012, the Parliamentary Standing Committee on Commerce said that India is the highest-cost producer among all tea-producing nations, while the price realisation has remained stagnant. From 1991, India’s tea production grew by 60% but exports remained stagnant at around 200 million kg except in 2013. This need to change and the new government must look to realise the export potential of the Indian tea market. The new government may look to withdraw the governmental oversee of the tea market – through the Tea Board of India – and encourage private players and market dynamics to take over.
Agriculture may well be the new government’s Achilles Heel. The sector contributes around 15% of the country’s Gross Domestic Product (GDP). No government can expect to have a prolonged happy hour with the sector, employing half of the country’s workforce, in imminent crisis.