Shadow of acute rural distress over Lok Sabha polls

Elections often tend to draw the attention of at least some stakeholders to real issues that plague the economy and society. This time rural India votes under the shadow of multiple important issues including falling rural wages, collapsing agricultural prices, rising input prices and two consecutive years of below-normal monsoons which has severely depleted water resources in most river basins. Together a confluence of factors has helped create a perfect storm in rural society making agriculture un-remunerative and fuelling distress migration to urban areas. Unfortunately, the urban areas seem to be faring no better with ever-widening income disparities, rising unemployment and under-employment. Resultantly, India is at the cusp of wasting its much-hyped demographic dividend. The government’s response to these problems has not only been inadequate, instead, it has been accompanied by rhetoric that attempts to divert the attention of the people by pushing abstract ideas like nationalism and national security at the cost of livelihoods.

Policy confusion aggravated by debts
As per RBI data, the total credit outstanding to priority sector agriculture and allied activities increased from Rs 7.58 lakh crores at the end of February 2015 to about Rs 10.532 lakh crores at the end of October 2018. Approximately, Rs 8.90 lakh crores was direct finance to agriculture in rural, semi-urban, urban and metropolitan areas. Amongst this, the outstanding loans under the Kisan Credit Card scheme amounted to Rs 3.911 lakh crores of crop loans and another Rs 41,980 crores of term loans at the end of March 2018 – a figure that has increased since then.

The reality of Indian rural society is that the loans raised from the formal banking sector are insufficient to sustain investments in agricultural production as well as meet other consumption needs, especially the ever-rising costs related to healthcare and education. These have been aggravated by a decline in margins thanks to the removal of subsidies and decontrol of various critical inputs which have served to increase the cost of inputs or cost of living in rural areas – at a time when incomes are declining. The fall in agricultural commodity prices this time is more severe because, unlike in the past few decades, this fall has severely affected earnings from petty commodity production, which often serves as a buffer.

Acute rural distress has been made worse by the NDA government’s policy towards agriculture, which has vacillated between over-enthusiastic rhetoric, empty promises about doubling farmers’ incomes and policy confusion. Unfortunately for rural households, the rhetoric has largely not been backed by policies. In 2015, the Prime Minister called upon farmers to make India self-sufficient in pulses by producing more – without the government apparently doing the required homework about creating a market for any attendant increase in production. The resultant sharp increase in production led to a collapse in prices.

Each successive botched policy intervention has left the agricultural producers more exposed to the vagaries of the market without allowing them to reap the benefits. A good example is the promise of agricultural exports. The sudden removal of agricultural export limits or grant of new permission to import is the norm which means that volatility in prices is the norm rather than the exception. This lack of clarity means that Indian agricultural exports will find it difficult to build a client base in other countries due to the unreliability of supplies.

The promise about contract farming as a panacea for the problems in agriculture overlooks the problem of a large number of tenant farmers. The only ‘innovative’ solution to rural distress in the past year that the government could conceptualise is the provision of a paltry and wholly inadequate, Rs.6000 with stringent conditions attached and payable in three instalments for a section of the landowners through the ‘PM-Kisan’.

Road Ahead
The outcome of the election is likely to have an important bearing on the manner in which policymakers approach the agrarian crisis. There is a need for the new government to go beyond rhetoric and slogans. It will have to go beyond stop-gap solutions and seek fundamental long-term solutions. Any solution will have to grapple with the creation of a mechanism that offers remunerative prices, improving storage efficiencies at a low cost, increasing efficient use of scarce water resources and concurrently dealing with the ever-increasing need to assume debts for health and education needs of households. There is a need for the new government to systematically encourage non-agricultural activities in the rural areas to quickly generate jobs and to at least partly insulate incomes of rural households. In the above context, a moratorium on debt repayments, if not full loan waiver seems to be a good starting point and a short-term solution so that it offers the policymakers breathing space till more meaningful, long-term solutions are implemented.

(The author is an independent researcher based in Andhra Pradesh. Views are personal)