Farmers need much more than cash dole

Devinder Sharma
Food & agriculture specialist

FINANCE Minister Piyush Goyal, in his interim Budget speech, announced a direct income support of Rs 6,000 per year for small farmers owning less than 2 hectares. The sum is meagre by any standards, but the move is a tectonic shift in economic thinking on the role of agriculture in development. It entails a paradigm shift from the existing ‘price policy’ to move towards ‘income policy’, unlocking the immense growth potential in agriculture.

Although the Finance Minister has made a budgetary provision of Rs 20,000 crore for the remaining period of the ongoing fiscal to enable the first instalment of Rs 2,000 to be credited into the bank accounts of beneficiary farmers before the General Election, the petty amount has evoked a sharp reaction from the distressed farming community. And rightly so. 

I don’t know how a direct income support of Rs 500 per month per small farming household will be able to pull out 12 crore small and marginal famers from the terrible agrarian crisis. Nor do I understand how this meagre support will help in reducing the spate of farm suicides. There is hardly a day when farm suicides are not being reported from one part of the country or another. Take the case of Punjab, where even after the loan waiver of Rs 2 lakh per farmer was initiated in January 2018, 430 deaths have been reported in the year gone by, as per Bhartiya Kisan Union data. The question that needs to be asked is how did the policy-makers conceive the idea to provide a paltry direct support which will not even make an iota of a difference. 

Considering that the average income worked out by NABARD’s All India Rural Financial Inclusion Survey 2016-17 stands at just Rs 8,931 per month, it is certain that the direct income support of Rs 500 per month will not be enough to achieve the objective of doubling the farm income. Nor is this amount fit enough for any significant farm investments the farmer would like to make. The Economic Survey-2016 had computed the average income of a farmer in 17 states at a pitiful Rs 20,000 a year. In other words, the average income of a farming family in roughly half the country stood at less than Rs 1,700 per month. I shudder to think how several million farmers survive on that miserly income. 

Borrowing the idea from Telangana, the government has already made an annual budgetary provision of Rs 75,000 crore for the PM-Kisan Scheme (beginning with the full-fledged Budget expected after the elections), but there is no reason why the direct payment amount couldn’t have been doubled. At Rs 12,000 per small farmer, the budgetary allocation would have doubled to Rs 1.5 lakh crore. To the question where will the money come from, the best and easy instrument available for the Finance Minister was to immediately scrap the annual fiscal stimulus package of Rs 1.86 lakh crore being doled out to the industry, in operation since the global economic meltdown in 2008-09. While there is no economic justification for the package, it continues to be paid. A total of Rs 18.60 lakh crore has been paid to the industry since 2008-09, but no question has ever been raised about the fiscal imbalance accruing. I see no reason why this money couldn’t have been transferred to the farmers’ account.

Like in Telangana’s Rythu Bandhu scheme, the Centre, too, has kept the direct income support limited to land-owning farmers. The only difference being that while the Rythu Bandhu scheme is open-ended, which means even if a farmer has 10 acres, he will get proportionate support, the Centre is restricting it to farmers owning less than 2 hectares. It, however, excludes tenant farmers, who form 40 to 50 per cent of the farming population, from getting the same benefits. At the same time, direct cash payments landing into the bank accounts of absentee landlords remains a big problem. 

Nevertheless, as someone who has been a strong advocate of direct income support, it is gratifying to see direct payments now becoming an economic necessity. Agriculture has been and still remains a victim of the tyranny of markets. For more than four decades now, agricultural income had remained static, with many studies providing an empirical evidence of declining real farm income. Agriculture has been deliberately kept impoverished to keep the economic reforms alive. Keeping the food inflation low and by ensuring a cheaper raw material for the industry, the entire economic burden has been quietly passed on to the farmers. 

An economic model, where agriculture is treated with disdain and has been very cleverly projected as an uneconomic activity, has to be reversed. To say that the Rs 500 a month cash dole to small farmers may be increased in the future as the government’s resources grow is a reflection of the same faulty economic thinking. As a result, most economic resources have been slowly and steadily shifted to the industry. Since 2004-05, the industry has got Rs 55 lakh crore of tax concessions. NITI Aayog estimates these concessions to be 5 per cent of the GDP. Knowing that income saved is income earned, this is no less than direct income support. In addition, the industry has been provided with massive incentives, which in reality are subsidies. On the other hand, an OECD-ICRIER (Organisation for Economic Cooperation and Development-Indian Council for Research on International Economic Relations) study has worked out a total loss of Rs 45 lakh crore in the period between 2000 and 2017 on account of low farm prices.

If only the farmers were paid their legitimate dues, the face of agriculture would have been bright. Also, I fail to understand why governments have refused to take steps for ease of doing farming. Agriculture alone has the potential to reboot the economy and can sustain millions of livelihoods, thereby reducing the pressure on job creation. 

Providing direct cash payment to small and vulnerable groups is the first step for augmenting farm income. I am sure the direct cash amount will see an incremental increase with the passage of time. This has to be followed by the setting up of the Farmers’ Income Commission with the mandate to ensure a minimum monthly income of Rs 18,000 per farming family. This will open the doors to agriculture receiving more public sector investments, more holistic reforms, and in the bargain, being turned into an economic activity.