(Photo: Hindustan Times)
(Photo: Hindustan Times)

Opinion | Will Govt’s latest scheme of income transfer help resolve agrarian crisis?

The focus on short-term relief has also eclipsed the real issues that have caused the crisis

The data on food price inflation from last month confirms the gravity of the situation with food price inflation remaining negative for more than six months now. While the crisis in agriculture has intensified, governments have run out of policy instruments that can help the agricultural sector. Given that elections are only months away, the strategy has shifted from providing solutions for long-term structural issues to providing immediate monetary relief to farmers. While it was loan waivers for the last two years, the latest strategy to assuage the anger of the farmers has been to provide them with cash transfers. This was tried out by the Telangana government and it did pay rich political dividends. Buoyed by the success of the scheme, governments of other states that are going for legislative assembly elections this year, such as Odisha and Jharkhand, have also adopted some form of cash transfer with some variation in the amount and coverage. The attractiveness of cash transfers has also led to the central government announcing a cash transfer scheme of 6,000 per annum for farmers owning less than two hectares of land.

It certainly comes with its own set of problems inherent in any scheme of cash transfer dependent on beneficiary identification. There is certainly no clarity how these will be administered in a country with poor land record maintenance. It excludes sharecroppers, tenant farmers, and landless labourers who bear the brunt of the risks from price volatility and uncertain weather conditions. It may encourage household splits to avail monetary benefits. Above all, the amount being transferred is barely enough to pay for inputs in one season, leave alone for the full year.

The focus on short-term relief has also eclipsed the real issues that have caused the crisis in the first place. While the crisis may have worsened only recently, it is not just because of contemporary factors. It has been accumulating for some time now and is basically a result of years of neglect and poor policy choices. It certainly pays rich political dividends and to the extent that the crisis is a reflection of demand deficit in the countryside, any form of income transfer is likely to create demand. The increase in rural demand may help push up prices in the short run, but this is unlikely to be the long-term solution for the crisis in agriculture. However, that is the only benefit of any cash transfer scheme.

The scheme is unlikely to help the agricultural sector and farmers in the long run. It also comes with a cost that is likely to aggravate the situation rather than reduce the stress in agriculture. The nature of agriculture in the country has certainly changed in the last three decades. Apart from the fact that increasing mechanization and monetization of inputs has increased the dependence of farmers on cash and loans, it is also accompanied by a changing cropping pattern. Given the low size of farm holdings, farmers have increasingly taken to cash crops, including fruits and vegetables, to boost incomes. This is also a reflection of changing consumption patterns given rising per capita incomes. However, most of these crops such as fruits and vegetables are also perishable and they suffer from extreme price volatility. As against this, the nature of state support to agriculture has remained linked to minimum support prices (MSP) and other input subsidies such as for fertilizers, benefiting traditional crops such as rice and wheat. However, a bigger fallout of the symptom of providing short-term relief has been the decline in investment in agriculture. The increase in revenue expenditure at the cost of public investment has pushed a majority of farmers to private providers of loan and marketing and storage infrastructure along with the increasing role of middlemen.

The real danger of short-sighted policies, such as cash transfer and loan waivers, despite being politically attractive, is that these take precious resources away from investments that could have boosted farm incomes in the long run.

Himanshu is associate professor at Jawaharlal Nehru University