November , 2019
Regularise payments in PM-Kisan scheme to lower rural distress
17:09 pm

Kishore Kumar Biswas

The Pradhan Mantri Kisan Samman Nidhi Yojana (PM-Kisan) was announced by the then Union Minister of Finance, Piyush Goyal during the 2019 Interim Union Budget. The PM-Kisan scheme promises payment of  Rs 6000 to each farmer family every year in three instalments. This scheme was meant to provide assistance to the farm sector that is in the midst of an agrarian crisis.

There have been a lot of surveys and reports about rural stress and the increasing unfavourable terms of trade as compared to industrial and service sectors. Although allocation of such a small amount of money to rescue families from their distress has been a subject of criticism, if the payments are regularised, it may be of some help to the distressed farmers. However, payments have been irregular from the beginning. Additionally, the proportion of non-payment is also increasing rapidly.

A recent research by Ishan Anand of Ahmedkar University, Delhi and Rohit Azad of Jawaharlal Nehru University (JNU), Delhi, published in the Economic and Political Weekly, (October 12, 2019) indicates poor implementation of the scheme citing non-payment of the instalments to a large section of selected beneficiaries.

According to the article, “The second instalment of PM-Kisan was to be disbursed by July 2019. More than 30% of the identified beneficiaries have not received the second instalment in Bihar, Chhattisgarh, Jharkhand, Maharashtra, Madhya Pradesh, Odisha, Rajasthan, and Uttarakhand. The proportion of beneficiaries who are yet to receive the fourth instalment (due between August and November) is over 70% in almost all major states.”

Anand and Azad wrote in the same article, “The lack of urgency shown in the implementation of the PM-Kisan, the flagship scheme of the NDA government, has further blunted the relevance of the scheme and failed to sufficiently boost demand.”

Reasons behind falling purchasing power of the rural people

One can notice that there are some policy decisions in the last four to five years which have not been able to boost the economy to the desired extent. The recent report of Moody’s, an international credit rating organisation, has been a cause for concern. The outlook points out that, “The government has been partly ineffective in addressing economic weakness.” Moody’s downgraded the outlook to India to ‘negative’ from ‘stable’.

Some policy ineffectiveness

In the last five years, many economic policies taken by the central government has not been effective. Himanshu, Associate Professor of Economics, JNU, New Delhi, has pointed out that a set of economic policies which have not been fruitful and are hence responsible for the ongoing slowdown of the economy. Some of them are relevant in this context. Firstly, when petroleum prices fell in August 2014, the government did not pass out a significant portion of the benefit to the users. This could lower the cost of production. Surprisingly, the prices of agricultural commodities actually fell and that increased the stress of the farmers.

Secondly, in 2014-15, the Indian economy experienced a rare double drought. That deepened the rural crisis. At that time, no effort was seen from the part of the government - either to raise the prices of domestic agricultural prices or to increase the investment support for the farm sector. On the contrary, the third mistake had been to reduce the real investment in agriculture in that critical period.

A major shortcoming of the present economic policy was seen in 2016. In that year, the rural economy slipped into crisis with declining real wages and farm income. It is said that at that time, the government should have implemented rural income generating schemes, like NREGA, in a bigger way. But the opposite was done. Rural development expenditure was squeezed in real terms. And then demonetisation was declared. That affected the entire unorganised sector and the agricultural sector was hard hit. It is now known that almost none of the targets of demonetisation were achieved. On the contrary, the demonetisation policy initiated a prolonged distress in the economy. There were other economic policies that should have been done in judicious ways but were implemented in haste. The implementation of GST and declaration of farm loan waiver was for political gains. These two policies also negatively affected the rural economy.

Probable way out

There are ways to come out of the slowdown. Economists suggest some policies which are mainly pivoted around the concept of increasing the purchasing power of common people. At the same time, the government has taken some steps which have helped to lower the cost of production of industries and services. As it is a demand side problem, it should be implemented properly.

Some of the policies will go towards increasing green energy. The green energy system is inclusive and equitable. This is because the green energy system, according to some economists, is labour-intensive and employment elastic. Secondly, the government has to implement minimum wages efficiently. One should keep in mind that the Indian parliament has passed the Code of Wages without mentioning the minimum wage amount. Here recommendations of the Satpathy Committee can be implemented. Thirdly, the allocation for MGNREGA should be increased in real terms and implemented properly. Fourthly, one should not stick to fiscal deficit at the predetermined level. The common notion of fiscal deficit and its underlying economic rationale may be relooked and changed to enhance the purchasing power of the common masses.


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