A little over a year ago, the Modi government took to making professions of love for the poor farmer. This was a sign that that political developments were not going as the BJP wished. Recall that, when the Modi government came to power, it did not present itself as a pro-poor party. Rather, it presented itself as the champion of the ‘aspirational’ classes; growth would solve problems such as poverty. Arun Jaitley’s first Budget speech, in July 2014, began by stridently declaring:

The people of India have decisively voted for a change. The verdict represents the exasperation of the people with the status-quo. India unhesitatingly desires to grow. Those living below the poverty line are anxious to free themselves from the curse of poverty. Those who have got an opportunity to emerge from the difficult challenges have become aspirational. They now want to be a part of the neo middle class.

Thus Modi declared famously that he was keeping the National Rural Employment Guarantee Scheme alive merely to highlight the Congress’s failure to develop the country:

My [political] understanding tells me never to remove MGNREGA because it is an example of six decades of failure of the Congress party; it has to pay people to dig ditches.

As part of this effort at accelerating ‘growth’, the Environment Ministry issued project clearances at an even faster rate, the Government attempted to amend the Land Acquisition Act in favour of the corporate sector, and the person-days of employment created under MGNREGA fell by 25 per cent between 2013-14 and 2014-15 (a drought year). Sensing the regime’s vulnerability, Opposition parties had started projecting it as pro-corporate and pro-rich – as Rahul Gandhi termed it, “suit-boot ki sarkar”.

There was widespread evidence of rural distress during the first two years of the Modi regime: large-scale distress migration¹ ; a sharp rise in peasant suicides (see National Crime Research Bureau data for 2015²), an outright fall in agricultural real wages by 2015-16³, and the continuing deterioration in the terms of trade for agriculture since 2010-11.⁴

By 2016-17, after defeats in the Delhi and Bihar elections, there was a clear change of tone in the BJP’s pronouncements. Jaitley rediscovered the ‘downtrodden’, i.e., those on whom his government had been busy treading for the previous two years:

We believe in the principle that money with the Government belongs to the people and we have the sacred responsibility to spend it prudently and wisely for the welfare of our people, especially the poor and the downtrodden.... The priority of our Government is clearly to provide additional resources for vulnerable sections, rural areas and social and physical infrastructure creation.

This sudden shift of the focus of concern, from the ‘aspirational’ to the ‘vulnerable’, was occasioned by the discontent the Modi regime started facing from sections of the people. Now the Modi regime reinvented itself as a fighter for the poor. Even the demonetisation exercise was projected as a strong measure against the rich, and for the poor. Union HRD Minister Prakash Jawadekar candidly divulged the motivation for this rhetoric: “The pro-poor plank used to be with Congress but is now with us.”

MGNREGA spending: steep fall from 2009-10 level
The hollowness of these claims can be seen from data regarding the rural employment scheme. Last year’s Economic Survey noted that the 2014-16 period was only the fourth instance of back-to-back droughts since 1901. Such a grave situation called for a correspondingly massive response from the State to meet minimum human and animal needs, and protect livelihoods. Instead, the response was miserly and callous. MGNREGA employment had in fact already been reduced sharply under the UPA itself, from 2.8 billion person-days in 2009-10 to 2.2 billion person-days in 2013-14. The Modi regime cut it further to 1.66 billion person-days during the drought year 2014-15.

Finally, during the course of 2015-16, in the face of extreme rural distress and the BJP’s electoral setbacks, the Government was forced to raise MGNREGA expenditure and employment, as can be seen from Chart 1. But even so, the final figure of employment for 2015-16 was 17 per cent below the figure for 2009-10. The figures for expenditure in a specific year may be misleading, as arrears of payment may be paid in the following year; nevertheless a clear downward trend can be seen as a percentage of GDP. We do not yet have the figure for employment generated in 2016-17.

The figure budgeted for 2017-18 has been set at virtually the same level as the revised figure for 2016-17. After accounting for inflation, not to mention wage payment arrears, the increase is negative.

Even the increased allocation for MGNREGA budgeted for 2016-17 is projected to be only 0.32 per cent of projected GDP, and is budgeted to fall to 0.28 per cent of projected GDP for 2017-18. This is half the ratio for 2009-10 (which was 0.59 per cent). Thus even the apparent revival of the rural employment scheme is at a much lower level.

The nebulous ‘doubling’ claim
As part of the Government’s new ‘pro-poor’ stance, the Prime Minister last year made the vague declaration – “Let us aim to double the income of farmers by 2022”. (Note the careful qualification: “aim”.) This declaration attracted much publicity, but neither the Prime Minister’s Office nor the Finance Ministry ever clarified what exactly he meant.

It was a member of the NITI Aayog, Bibek Debroy, who clarified in a television interview that the doubling was meant in nominal, not real, terms, i.e, not after discounting for inflation. In such terms incomes could double anyway, even without “aiming”. For example, GDP per worker in agriculture more than doubled in nominal terms during 2004-05 to 2009-10, but the real growth was only one-fourth of that.⁵

If the Prime Minister was talking of doubling incomes in real terms, that would imply a real growth rate of more than 14 per cent a year, probably without historical precedent in the world for a five-year period. Is there any sign of spending by the Centre for such an ambitious target, either in the current year’s expenditures or the Budget for the coming year?

Paltry spending
No, there is no such sign. It is true that, in his previous Union Budget speech (i.e., 2016-17), the Finance Minister parroted his master’s claim: “We are grateful to our farmers for being the backbone of the country’s food security. We need to think beyond ‘food security’ and give back to our farmers a sense of ‘income security’. Government will, therefore, reorient its interventions in the farm and non-farm sectors to double the income of the farmers by 2022.” (emphasis added).

However, he proceeded to spend a measly 0.26 per cent of GDP on the Department of Agriculture and Farmers’ Welfare for 2016-17. This was in fact lower than the 0.27 per cent of GDP spent in 2015-16.⁶ This is budgeted to fall to 0.25 per cent of GDP in 2017-18.

Even if we were to include all Central Government expenditure on agriculture, rural development (e.g., including MGNREGS) and water resources, the percentage would come to just 1 per cent of GDP in 2016-17, an increase of a mere 0.1 percentage points over the previous year. Even the addition of the fertiliser subsidy to the above set of expenditures brings total Central spending on these heads to just 1.46 per cent of GDP.

It is state governments that incur the major expenditure on agriculture, at about 1 per cent of GDP, i.e., about four times the Centre’s expenditures. If we add up the total of agriculture, rural development and irrigation expenditures, the figure for the states comes to 3 per cent, i..e, three times the figure for the Centre on those three heads.⁷ Thus a grand total for all Central and state spending on agriculture, rural development, irrigation, and fertiliser subsidy would come to about 4.5 per cent of GDP.

This on a sector which, as the Finance Minister notes, is “the backbone of the country’s food security”, and still employs about half the workforce. Although the latest data for the state governments are not available yet, it is very unlikely there is any change in this figure.

* The interest subsidy provided from the Budget for short term loans to farmers was given through the Ministry of Finance up to 2015-16; since 2016-17, it has been given through the Ministry of Agriculture. Hence the sudden jump in spending by the Ministry of Agriculture in that year is largely the re-shuffling of existing expenditures.

In his latest Budget speech (for the year 2017-18), the Finance Minister did not reveal how much progress he has made in the direction of doubling farmers’ incomes. The average annual growth in agricultural GDP for the first three years of Modi has been a mere 1.7 per cent. However, he reiterated his resolve to “double” farmers’ incomes, maintaining his earlier vagueness about how he planned to achieve this without increasing spending. (To complete the confusion, an unnamed senior official has recently “clarified” that when the Government talked of doubling farmers’ income, it did not necessarily mean their income from agriculture.⁸)

Moreover, any such talk of ‘doubling’ income refers to an average for all farmers – marginal and poor peasants, middle peasants, rich peasants, landlords. The incomes of different sections of ‘farmers’ might grow at different rates. For example, survey data show that in the period 2002-03 to 2012-13, for farm households with land holdings of 0.01-0.4 hectares, the real increase in income⁹ was only 21 per cent over the ten-year period. (This despite the important fact that the initial year was a drought year, and the terminal year was a normal year; thus much of the difference could be accounted for merely by better weather.) Whereas for households with 4-10 hectares of land, the real increase was 47 per cent. So the question arises: whose incomes are meant to double?

It is obvious that maintaining budgetary expenditures on agriculture at the same level of GDP, and indeed reducing aggregate demand by cutting the fiscal deficit in the midst of a recession, will not double real incomes of farmers, but do the exact opposite. It is even more obvious that ‘demonetisation’, by sucking out purchasing power and providing a whip to traders, has further depressed the already poor returns to peasants. This has more than neutralised the benefit of the recovery in production (on account of a normal monsoon in 2016).

 

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Notes:

1. Frontline, “Rural tragedy”, cover story of March 4, 2016. (back)

2. Priyanka Kakodkar, “Farmer suicides up 42 per cent between 2014 and 2015”, Times of India, 6/1/2017. (back)

3. Labour Bureau data, cited in Commission for Agricultural Costs and Prices, Price Policy for Rabi Crops: The Marketing Season 2017-18, p. 69.  (back)

4. Economic Survey 2014-15, p. 18, and Commission for Agricultural Costs and Prices, Price Policy for Kharif Crops: The Marketing Season 2016-17, p. 84. (back)

5. GDP in agriculture and allied sectors rose from Rs 5,65,426 crore in 2004-05 to Rs 10,83,514 crore in 2009-10, even as employment in the sector fell from 268.6 million to 244.9 million; but in constant (2004-05) rupees, it grew to only Rs 6,60,897 crore in 2009-10. (back)

6. If we include for 2015-16 the interest subsidy on short term credit for agricultural loans, which till that year were classified as expenditure of the Ministry of Finance, but from 2016-17 were shifted to the Ministry of Agriculture. (back)

7. RBI, State Finances: A Study of Budgets, 2016. (back)

8. Sanjeeb Mukherjee, “Govt to double income of farmers by 2021-22”, Business Standard, 13/2/2017. (back)

9. That is, the nominal increase deflated by the Consumer Price Index for Agricultural Labour. (back)