Agriculture takes back seat

ECONOMIC REFORMS : Providing rightful income to farmers is what will push domestic demand and revitalise rural economy at the same time.

Come to think of it, in the past 25 years, ever since economic reforms were unleashed, the average monthly basic income of a government peon has gone up from Rs 7,500 to Rs 18,000, and of the cabinet secretary from Rs 30,000 to Rs 2,50,000. Although the wage hike of government employees has nothing to do with economic liberalisation, still I find the rise in their salaries is shown as a bright outcome of the reforms process.

Now, compare this with the income a farmer gets out of agriculture. Economic Survey 2016 tells us that the average income a farmer gets from farming activities, including what he keeps for his family consumption at home, in 17 states of India is Rs 20,000 a year. In other words, the monthly income of a farmer in these states is a paltry Rs 1,666. On a national level, the NSSO works out the average monthly income that a farmer derives from farming operations to be just Rs 3,000 per family.

The deplorable condition of farmers is certainly an outcome of economic reforms. Simply put, economic liberalisation or economic reforms or market economy whatever you prefer to term it as, has bypassed the majority population. Agriculture, like other unorganised sectors, has been the biggest casualty.

It was in July 1991 when Manmohan Singh delivered the historic budget speech as finance minister that opened up the country to economic liberalisation. I recall the speech wherein he unshackled the industry from the control regime and showered all bounties on industries and in the very next paragraph acknowledged that agriculture remains the mainstay of the economy.

But since agriculture is a state subject, he left it to the state governments to provide the much needed impetus to farming. But what he forgot to say was that industry too was a state subject and should have been left to the state governments. The bias therefore was clearly visible.

This was simply not an unintended fallout of the process of economic liberalisation. It was actually part of a design. Later, in 1996, the World Bank directed India to move 400 million people out of rural areas to the urban areas in the next 20 years, saying that land is a precious asset in the hands of people who are inefficient producers, meaning farmers.

Since the younger generations among farmers do not know anything except farming, World Bank suggested that India set up a network of training institutes to train these people to become industrial workers. This should be accompanied by land rentals and land acquisitions.

Going by the World Bank prescription, successive governments have been blindly playing to the tune. As prime minister, Manmohan Singh had time and again said that 70% farmers in India were surplus and need to shift to urban areas. RBI Governor Raghuram Rajan is on record saying that big ticket reforms will happen when India moves a large share of the farming population to the cities. And more recently, Finance Minister Arun Jaitley has blamed agriculture for not being able to provide subsistence to a large section of the population thereby increasing inequality.

What he forgot to say was that successive governments had deliberately starved agriculture of financial resources and had kept the farming population impoverished. This is evident from the way agriculture remains a low priority area when it comes to budgetary allocations. In the 11th Plan, agriculture received only Rs 1 lakh crore as budget outlay for the five years. In the 12th plan period, agriculture got Rs 1.5 lakh crore.

Incidentally, the budgetary support for agriculture, which employs 52% of the population, is less than the annual provisions being made for the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA). In addition, the Minimum Support Price (MSP) for wheat and rice had remained almost frozen, with annual increase in farm prices not exceeding 4% on an average. No wonder, 48% farmers want to quit agriculture if given an alternative.

Higher labour wages

In fact, the plight of agriculture is not only deliberate but has for all practical purposes, sustained the economic reforms. If the farmers were paid their economic due by way of, let’s say, a higher MSP, the industrial and business sector would have gone for a toss because of the additional costs involved for paying higher labour wages that incorporates resulting high food prices.

At the same, a higher price for farm produce would have raised the cost of production of many industries. In addition, a high paying agriculture would have also reduced the rate of migration and thereby reduced the availability of cheaper labour for infrastructure and real estate.

The real cost of economic reforms therefore is being borne by rural India, of which farmers constitute the majority. The first-ever Socio Economic Census has clearly brought out the stark reality. India’s performance when measured as per the Human Development Index too shows the burgeoning inequality. India ranks 130 among a ranking of 188 countries. The economic reform that we talk about therefore has largely been pro-rich. The rich 1% own 51% of country’s wealth.

Keeping agriculture impoverished all these years has sustained economic reforms. The big bang reform India needs is essentially in agriculture. Providing the rightful income into the hands of farmers is what will push domestic demand and at the same time revitalise rural economy. If the Seventh Pay Commission is being seen as an economic booster, as it is expected to create more demand for consumer goods, imagine the kind of shot in the arm a higher income in agriculture will give to the Indian economy.