New Delhi: Last year, Reliance Industries Ltd’s (RIL) plan to acquire land to set up its special economic zone in Jhajjar and Gurgaon in Haryana ran into the barrier of escalating land prices. Farmers wanted Rs1 crore an acre for their land, more than double the Rs38 lakh RIL was offering. It was the same story in most parts of the country as the push for industrialization led to a scramble for scarce land.
Village voice: A man talks on a cellphone at Khirni village, Rajasthan. DoT says phone connections in rural India grew 400% between ’04 and ’07. Harikrishna Katragadda / Mint
Besides highlighting the industry-agriculture conflict, the scenario also captured one of India’s most compelling stories in this millennium. One that has, in a sharp break from the past, led to a steady economic empowerment of the rural population, particularly those who live close to rapidly transforming industrial hubs and cities.
It is actually the outcome of an interesting constellation of circumstances, rather than the fulfilment of an economic strategy.
The United Progressive Alliance, or UPA, has reordered government spending. It is no longer spending only on programmes that deliver the final product to the beneficiary—whether in the form of subsidized food, electricity or building a dam to provide irrigation water to farmers—but has added a new dimension wherein funds are transferred to the beneficiary. This, in effect, gives the beneficiaries the freedom to spend the money and mitigates leakages.
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At the same time, improved rural connectivity, both in terms of roads as well as telephony, has allowed farmers to not only get better value for their produce domestically, but also to explore new export markets.
Sales in domestic markets have also risen steadily as a result of the government gradually pushing up the so-called minimum support price (MSP) for paddy, or unhusked rice, and wheat, while a depreciating rupee, particularly in the last one year, has ensured better realization on exports.
MSP is the floor price the government guarantees to farmers and which exceeds the cost of production. So, if there is a glut of produce in the market and prices fall, at the least, the farmer is guaranteed MSP.
Since prices of industrial goods have not moved in tandem with agricultural products, it clearly means that the terms of trade—or the exchange value between industrial and agricultural goods—have moved in favour of agriculture. Also, input costs have risen only marginally, ensuring that the surplus accruing to the farmer is that much more. As a result, this transfer of wealth is not a one-off push, instead it is the outcome of a combination of factors, some of which are enduring.