Economic Highlights
New Delhi, 26 December 2017
Budget After Poll
SHIFT TO AGRO-RURAL ECONOMY
By Shivaji Sarkar
Gujarat elections are likely
to change the focus of Indian economic policies. The last full Budget of the
Narendra Modi government may have larger focus on the agro-rural economy. While
farmers and rural economy is likely to get a better attention, cut in income-tax
also cannot be ignored.
The rural-urban divide is now
in sharp focus after these polls. The rural voters have swung to the Congress.
The BJP has got 72 per cent of its lead from the urban seats and the Congress
gets 89 per cent of leads from rural ones. It is interpreted as a clear discontent
against their deteriorating economic conditions, falling prices of cotton,
groundnut and other crops.
The government support to
farmers is indirect largely through MSPs. No support is given for investment in
crops. The farmers have to depend on loans or their own resources. Subsidies
have been done away with except for some interest subvention.
At the same time, the phenomenon
is not restricted to one State. It is an all-India phenomenon. Agricultural growth
is an important driver of political fortunes in State elections. With eight States – Meghalaya, Mizoram, Nagaland,
Tripura, Rajasthan, Madhya Pradesh, Chhattisgarh and Karnataka - slated to go
for polls in 2018, policy changes are all the more necessary.
Interestingly, BJP
parliamentarian Varun Gandhi in an article in September, three months before
the Gujarat elections, has suggested a national discussion on rural distress.
The Congress won 55 of the predominantly rural seats in Gujarat about 10 more
than the BJP. But it appears that the BJP still enjoys the confidence of the
people for the image of Prime Minister Narendra Modi -- the belief that
corruption could be tackled by him alone and that he is responsive to the
people’s problems. And it has been seen that Surat traders protest but vote for
BJP as the GST rates on 198 items is reduced.
Another significant aspect
is the Muslim votes. The BJP is stated to have got about seven per cent more
Muslim votes, now at 27 per cent; and Congress lost about six per cent, now at
64 per cent. The national Muslim politics is bound to change or look for new
moorings as BJP does not woo them and the Congress ignores them. Sizeable
number of Patidars chose to stay with BJP because of Modi. Most MLAs today are
thankful to him more than their own popularity.
The shift in non-urban vote
base is obvious. This is likely to change the budgetary focus. Finance Minister
Arun Jaitley has indicated that the government will analyse and address the
results in the Gujarat districts that highlighted farmers’ issues. Higher
spending for the farmers is not unlikely.
Rural Gujarat saw better times under Modi’s
administration. The average monthly per capita expenditure (MPCE) from the
National Sample Survey Office (NSSO) shows that compound annual growth (CAGR) of
MPCE in rural Gujarat was the highest under the period which broadly coincides
with Modi’s tenure.
But during the past few years their income
has come down to about Rs 7,000 a month more than the national average of Rs
6400. This is the crux of future politics. Modi says he would double farmer’s
income by 2022 but that would be far less than the salaries of a government or
factory worker or even an urban rag picker.
Not surprisingly, larger numbers of farm
families are migrating to cities as they not only have lower income and higher
input costs but also face cash crunch in the wake of demonetisation last year. Farmers
almost everywhere in Bihar, Uttar Pradesh, MP, Maharashtra, Punjab, Andhra or
West Bengal are not getting the bare minimum prices for their products, be it wheat,
pulses or potato. Potato wafers prices
have skyrocketed but the farmer is not getting back even his input cost. The
government owned NAFED is not making any purchase in States like Bihar owing to
a dispute on sales tax with the State government since 2009.
The Planning Commission in 2011 estimated
that the size of agricultural work force would shrink to less than 200 million
(20 crore) by 2020. About 30.5 million left farming from 2004-05 to 2010-11
seeking employment in secondary and tertiary sectors – meaning lowly jobs
A Punjab University study showed that small
-- one to two hectare (ha) and marginal farmers -- less than one ha, face a
greater burden of debt. Over 50 per cent of the loans are from non-banking
sources, mahajans (money lenders).
Average land holding size decreased from 2.3 ha in 1971 to 1.16 ha in
2011. A farmer now earns Rs 2400 for paddy per ha and Rs 2600 for wheat per ha.
Worse, farm labourers earn less than Rs 5,000 a month.
But despite this 54 to 58 per cent people
have direct or indirect employment in the farm sector – about 75 to 80 crore.
All government policies since the first five-year plan typically are focused on
weaning these people away to industry and other sectors. Sadly enough this has
not succeeded as most labour intensive sectors have been highly automated,
population increased and employment opportunities shrunk.
The Manmohanomics that is stated to have
brought “reforms” have heaped woes on all kinds of workers. Real wages of
industrial workers have not risen in proportion to those working in the organised
government jobs. Large unemployment and social distress, often called jobless
growth, has increased. Over 3.21 lakh farmers committed suicide in the last two
decades, as a consequence of Manmohanomics.
It also saw continuous high inflation, except
for 1998-2004, during the Prime Ministership of Atal Behari Vajpayee. Since
2010, inflation has risen by over 50 per cent eroding the wage gains as there
has not been any change in income tax rates. The GST has increased prices.
These reflect on lower purchasing power and consequent low growth.
The Modi government would have to present a
drastically different budget as Agriculture Minister Radha Mohan Singh says the
government will intensify farmer welfare schemes and ensure their effective
implementation as well as the payment of MSP, which States are not paying.
This also needs to aim at higher government
expenses and drastically change the economic policies and drift away from
Manmohanomics. The government has to look into
the pattern of direct subsidies paid by the US and other western countries to
farmers.
The February Budget has to be a landmark for
changing the course of the country, stem rural distress, plan for smart
villages and direct government investment or subsidy in agriculture in tune
with Deendayal Upadhyay’s integral humanism or Gandhian socialism. And with an eye
on 2019 General Elections. --- INFA
(Copyright, India
News & Feature Alliance)
|