The bout of unseasonal rainfall in north India over the last few weeks has triggered fears that standing Rabi crop may have suffered extensive damage. It may or may not be true. Regardless, it has once again put the spotlight on the agriculture sector, exactly two weeks after finance minister Arun Jaitley listed it as the first of five key challenges facing the Indian economy while presenting the Union budget.

Those watching the agriculture sector closely have been warning about the emerging crisis, but the finance minister’s remarks are hopefully the first step in refocusing public policy with respect to agriculture. This is because the emerging crisis is like one never before. Hence, it would be a mistake to handle it like business-as-usual. The Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) will be judged on how it deals with the problem; recognizing the problem is the first step, but a lot depends on how it executes the rescue.

It is being brought upon by a combination of unique circumstances. Matters have come to a head with the global commodity super cycle (the dramatic decline in crude oil prices over the last one year is part of this phenomenon) coming to an end. The paring of spending on social sector programmes—or death by neglect as in the case of the Mahatma Gandhi Rural Employment Guarantee Scheme—forced upon successive governments, thanks to the bindings of the fiscal deficit burden, has only compounded the problem.

But this is only the tip of the proverbial iceberg. The contours of the emerging crisis is far more structural in nature and exactly why it is very different from previous ones. At the core of this altered context is the Indian farmer, who is particularly vulnerable. The Economic Survey of 2014-15 warns of a “deeper shift" in agriculture and calls for “greater attention".

For one, the composition of agriculture has progressively undergone a fundamental change—cash crops are now an increasing part of the new farming lexicon.

For example, horticulture has emerged as the dominant segment. Given its perishable nature and link to the price cycle, it is prone to volatile risk behaviour. As reported in Mint in January, horticulture production (268.9 mt) surpassed foodgrain output (257 mt) for the first time in 2012-13. The trend has sustained even in the bumper crop year of 2013-14, with horticulture production (277.4 mt) surpassing foodgrain output (265 mt). Current estimates show the trend is likely to continue (

Similarly, the nature of farming too has changed. Inputs like family labour and domestic animals have declined dramatically. Since labour like water for irrigation, has to be procured from the market, is leading to monetization of inputs. This monetization of inputs is fine in good years, but in bad times, like at present, can squeeze the farmer incredibly. An attendant takeaway is that this once again demonstrates the fact that the Indian farmer is now far more integrated with the market economy—domestic as well as international. Hence, they are no longer insulated from exogenous shocks.

Himanshu, a Mint columnist and one of the best development economists in the country, has flagged this earlier and recently wrote in Farm Truths that the rural economy needed a stimulus to stave off a crisis (

Not without reason. Rural India, despite the shift away from agriculture, continues to absorb 48% of the workforce (till recently this proportion was two out of three workers). But since it accounts for less than 15% of gross domestic product, there is a tendency to take the agriculture sector for granted.

This would be a big mistake. Mere lip service won’t suffice. A previous series published in Mint on Census Towns—areas that are officially rural but mimic urban India—reveals that this population is as, if not more, aspirational. The 16th general election and the subsequent elections to the state assemblies clearly captured this streak of aspirations among the electorate—especially the youth, who are the dominant demographic segment today. So politically, NDA’s task is cut out, given that Bihar, primarily an agrarian economy is set to go to polls later this year.

It is also a fact that the rural economy has been the mainstay of the consumer economy for the last few years. Going by the quarterly results of fast-moving consumer goods (FMCG) companies, it is clear that growth based on rural sales is rapidly tapering off. So even in economic terms a public policy intervention is justified.

So all eyes are now on the NDA.

Anil Padmanabhan is deputy managing editor of Mint and writes every week on the intersection of politics and economics.His Twitter handle is @capitalcalculus.

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