Economic Highlights

New Delhi, 6 June 2014

Farm Sector

JAITLEY FOCUS RAISES HOPE

By Shivaji Sarkar

The BJP Government is in a most unenviable position. It has inherited empty coffers, huge undesirable subsidy burden to fund programmes such as MNREGA and food security, which benefit the people only cosmetically and task to build up the nation literally from scratch due to the scotch the earth policy of the Manmohan Singh Government.

Finance Minister Arun Jaitley has to virtually do a rope trick to take the economy out of the morass. The Budget would be new but in an old bottle given in the shape of the UPA Budget presented in February. The limits have been set. Jaitley has to do the most difficult task to break from it while neither abandoning it, technically impossible, nor getting mired into it. He has to draw a lot from the BJP’s vision document, manifesto, some traditional beliefs and modernity.

Jaitley has to draw up plans for reversing the inflationary trends. Prices have yet to show positive signs except that of gold. That one policy initiative, of allowing imports by large firms, shows that much could be achieved. It has, however, not impacted the commodity prices. This is the litmus test for the Finance Minister and Narendra Modi Government.

The people have great expectations. They have suffered through the years of UPA-Congress rule. They want to see a Government that functions differently with a different vision. Manmohanomics has failed them and they do not want an iota of it. Junking it is easier said than done.

The UN agencies are calling for break from the IMF-World bank-Manmohan model of economics. The new model has not yet come up but it calls for giving up financialisation of economics, commodities and a freer and wider market. The 1991 economic policies brought in more scepticism. Most of it has proved true. It had helped the large houses but at severe cost to the people.

Jobs have sunk, poverty in absolute terms has increased, manufacturing and industry touched nadir and simple living, forget about the lifestyle, has become expensive. Jaitley is expected to correct it.

He has sent the right signals by beginning the talks with some agriculture experts. Yes, no growth and better lifestyle are possible without boost to agriculture and shifting the focus to it. What Mahatma Gandhi had said – India is an agriculture economy – remains true to this day. This has to be made the pivot for a future growth strategy. People want Jaitley to change the focus of economy. The corporate feel envious of this concept. They apprehend losing their clout. Farmers they know may be larger in numbers but lack the power and clout of the corporate.

The price stabilisation fund, introduced by the Atal Behari Vajapyee Government, that the Modi Government is keen on pursuing needs a thorough look. It raised prices of coffee and tea. One only hopes it would not happen to other commodities that it wants to extend. People are not in a mood to listen that a developing consumerist society would have to pay higher prices, as many economists say.

The policies oriented towards farms require careful scrutiny. The US is often cited as a country where food grain and essential commodity prices have remained near stable for decades. It has been achieved through high farm subsidies. The Modi Government may want it but has the crucial problem of fund crunch. It barely has money to run the Government.

Reintroduction of farm subsidy – it has to be done in an imaginative way – to encourage the farmers in a profession that is losing its sheen is not easy. It has also to look at how farm input – seed, fertiliser, pesticide - costs could be reduced.

The farmers must not be treated as corporate consumers. This outlook caused severe aberration during the UPA rule. Freeing the inputs from corporate clutches is not easy. The Government does not fix the prices. Corporate do it. Calling for a new farm policy is not so difficult. Its path of implementation needs deliberation.

The farm sector has become a battle ground between the corporate and the farmers. The companies want to capture all national wealth. The farmers are struggling to protect their small holdings from their greed aided by land acquisition by Government agencies.

Prime Minister Modi himself has to intervene. No Government, howsoever, efficient it might be could provide jobs to 70 crore people engaged in agriculture. The farm plan has to be made in a manner that they do not become victim of corporate predatory investments. The farmer has to be treated as an entrepreneur. The previous Government did not do it.

This Government has immense opportunity to introduce it to change the face of the country. It could be the first step to reduce the urban-rural income disparity. The village has to be made unit for India’s progress. It is too much to expect that the coming Budget could make this change. But the first step to achieve it could be taken. Our villages have made some progress despite Government apathy. The Budget could start giving a shape to that.

Many economists want ‘tax reforms’ for farm sector. It is a subtle way of suggesting bringing the sector under income-tax. They do not understand that despite odds, the agriculture has survived because of this reason alone. Such ideas must be junked.

The Government has commitment to remove income-tax. The DTC is a sham document and must be simplified and redone. The crucial issue, even if the Government wants to “go back to the villages”, is how it would find funds.

The 50 per cent of the Budget funds are raised through borrowings. There are not enough funds to run railways, power and other infrastructure projects. The cost of governance is increasing. It has to draw plans to reduce it on one hand and increase revenue realisation on the other.

Imports from China and WTO regime put tremendous pressure on the manufacturing and farm sector. If indigenous industry has to be given a boost, such imports have to be checked. The WTO comes in the way of farm subsidy.

Indeed, the path is beset with problems. Jaitley is being seen as the messiah. One hopes he is able to correct the path to farms, industry, manufacturing et al and bring back prices down to the 2004 level, when a performing Government was sacrificed at the altar of elections. ---INFA

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