Finally, the farm crisis takes political centre stage
A long-term solution to the farm crisis should recognize that the integration of Indian farming with the market needs to be accelerated
Last week there was a convergence of events, largely coincidental, which finally put the political spotlight on the long-neglected farm crisis. As they say, better late than never, because the crisis is impacting rural demand and thereby the bottomline of the corporate sector—tag the two together and the impact on the Indian economy is obvious, not to speak of the potential political fallout given that the rural sector accounts for almost 50% of employment.
For one, the first pre-budget discussion hosted by finance minister Arun Jaitley was on agriculture. With the upcoming Union Budget 2018 the last of this regime (as the final one will be a vote-on-account, given the 17th general election is due in May 2019), this is presumably a signal that the rural sector will be a central focus of Jaitley’s final full-fledged budget.
Second, the manifestos of the principal rivals in the ongoing Gujarat election campaign, the Congress and the Bharatiya Janata Party (BJP), contained a raft of promises on addressing woes of farmers in Gujarat. Without going into the merits of the promises, some of which are rank populist, it is fair to say, given the national status of these two political parties, that the farm crisis is getting a long-overdue national attention.
Third, Nana Patole, a BJP MP from Maharashtra resigned from the party. While it is a fact that his exit was no surprise, considering that he had been carping publicly for some time, Patole justified his inclement step on the grounds that his party (in the middle of one of the largest farm loan waivers) had failed to adequately address farmer woes. As the cliche goes, you can ignore the messenger, but not the message.
It is apparent that farm distress is the connecting theme for all of the above incidents. The obvious question to ask is why it has taken so long for politicians to take note. The neglect is part of a larger problem with public policy; ever since liberalization got a booster dose 26 years ago, industrial policy has dominated public policy discussion.
The refocus was understandable, but not the either-or approach which followed. Instead of a holistic approach, agriculture was all but ignored. It is a symptom of a larger malaise of public policy not being sensitive enough to agriculture as it has been to issues afflicting industry.
Despite this lack of hand-holding (unlike how industry is treated), Indian farming underwent a structural transformation, resulting in reduced importance of the traditional foodgrain economy. This was because farmers found greater returns (though it also increased the downside risks) by investing in such crops (as horticulture).
As long as global prices of farm products were on the rise the downside risks were covered. However, the collapse of global commodity prices in 2009, combined with a prolonged period of drought together with insufficient rains (including drought), almost broke the back of Indian farming.
The distress has manifested itself in the form of sporadic unrest defined around protests by Jat farmers in Haryana, Patels in Gujarat and the Maratha agitation. The writing is on the wall.
Signals over the last week or so suggest that finally farm distress is getting the attention of the politician. Presumably this is a prelude to evolving a long-term solution and not the usual platitudes that politicians pay to farmers during an election campaign.
The long-term solution should recognize that the integration of Indian farming with the market needs to be accelerated. The structural shift undertaken by Indian farmers suggest that they are not averse to operating in a market environment—all they want is (like any entrepreneur) an ecosystem that facilitates it in a transparent manner. Previous editions of Capital Calculus have dwelled on the initial steps (like a revamped crop insurance scheme) undertaken by the BJP-led National Democratic Alliance (NDA) to nudge Indian farming in this direction. It now needs to be taken to the next level.
Anil Padmanabhan is executive editor of Mint and writes every week on the intersection of politics and economics. His Twitter handle is @capitalcalculus.
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