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Government must look at policy options that go beyond loan write-offs to address farmers’ woes

Government must look at policy options that go beyond loan write-offs to address farmers’ woes


In the longer run, you do need that (farm) workers come out of agriculture into manufacturing and services jobs. If you don’t want to leave this population in that (poor) state,” reports had quoted economist Arvind Panagariya as saying within months of taking over as government think tank NITI Aayog’s deputy chairman.



That’s rosy when those sectors are doing well and the job market is booming as happened in 2005-2008. But since then the two sectors have hardly fired. The finance ministry’s economic survey revealed private investments shrank by 0.2% in 2016-17 compared to a growth of 3.9% the previous year.

“Raising manufacturing to 25% (of GDP, from 17% now) is the critical challenge,” says N Bhanumurthy, professor at National Institute of Public Finance and Policy. Government initiatives such as Make in India and Startup India to push manufacturing have so far not made a significant impact on national output and job creation. Moreover, industries are investing heavily in automation, requiring fewer workers. World Bank president Jim Yong Kim said in an October 2016 speech that the bank’s research predicted India will lose 69% of jobs to automation. That means the expectation that incentivising manufacturing and services would help absorb workers moving from farms to industries is misplaced.

Agricultural policy analyst Devinder Sharma offers an interesting statistic. In 1970, wheat procurement price was Rs 76 per quintal. In 2015, wheat procurement rate was Rs 1,450 per quintal, an increase of about 19 times. In the same period, average basic salary plus dearness allowance of central government employees rose 110 times; of school teachers by 280 times; of college/university teachers by 150 times; and of mid to upper tier corporate sector employees by 350 to 1,000 times.

Meanwhile, school fees and healthcare costs went up 300 times and average house rent in cities has risen 350 times. The option then left is increasing farmers’ incomes by accepting their demand of better prices. One way of ensuring better prices is allowing exports of farm produce. It would not only improve rural incomes but will also incentivise entrepreneurs to create storage and processing capacity in rural areas and consequently job opportunities. Sectoral linkages would ensure that rising rural incomes would fuel demand for manufactured products and services, boosting the two sectors and drawing capital and labour to them. Along with that, the government could also raise minimum support prices (MSP) to higher levels.

In 2006, the Swaminathan Committee had recommended an MSP of 50% over the cost of production of grains. It was also a big campaign promise made by the Bharatiya Janata party in the run-up to the 2014 elections.
Meanwhile, farmers are preparing to intensify their stir. At the June 10 meeting, one leader said that farmers were angry and could turn violent. Another leader from Rajasthan said whatever happens, the protests should remain peaceful. To which the first leader said that farmers would not be violent but, if the police do not keep quiet, they will forget about peace. Turbulent days could be ahead.







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