As the Narendra Modi government prepares to present its final budget of this term on Friday, Congress president Rahul Gandhi has played a wild card by promising to implement an income guarantee scheme for the poor if voted to power. While a similar scheme for farmers is widely anticipated in the budget as a solution to deal with agrarian distress, the Congress’ political strategy appears to be a bid to outmanoeuvre the Modi regime by forcing a return to the welfare state. Since being elected in 2014, the National Democratic Alliance government has shunned the entitlement route to governance, instead relying on market-based solutions such as crop insurance for farmers and health insurance for the poor, or the now forgotten Skill India programme, which attempted to help the rural poor move out of menial jobs. Politically, that strategy has backfired.
Take the case of agriculture, which employs over half of India’s workforce. While the Prime Minister set an ambitious target to double farm income, the average Indian farmer has witnessed a steady erosion in his prosperity and well-being over the past few years. In 2015, in the midst of widespread drought, large swathes of rural India struggled to stay afloat as social support programmes such as the employment guarantee scheme faltered due to a funds crunch. By end-2016, riding on a buoyant monsoon, rural India expected a revival. Instead, a sudden ban on high-value currency notes precipitated a consumption shock and crippled rural businesses, wherein cash is the mainstay of transactions. Meanwhile, the stagnation in rural wages shows that for the rural landless, even day jobs were hard to come by. A less understood impact of plunging rural incomes is how it led to a demand deflation and lower consumption of primary food items, which in turn abetted the fall in farm gate prices. A caring state apparatus should have picked up the signs of distress earlier.
However, after losing out predominantly rural states like Madhya Pradesh, Rajasthan and Chhattisgarh in the recently held elections, the Prime Minister is under pressure to be seen as initiating a course correction, though it might be too late for any new policy to show an impact on the ground and earn political dividends. For instance, a cash transfer scheme for farmers and the landless will not only be a challenge to finance and difficult to roll out in two months, it will also lead to lower public investments in agriculture, hurting farmers in the long run. An easier way to pump cash into rural areas is by increasing the budget for the employment guarantee scheme, more so, as several states, including Karnataka, Maharashtra, Odisha and Rajasthan, have declared themselves drought-stricken recently. But this may not be an option for Modi, who once castigated the scheme as a “living monument" of past failure before adopting it some way down the line. Meanwhile, for the protagonist in this drama, the proverbial poor, it may be a long haul before anything tangible materializes.