It is now well established that demonetisation has had a crippling impact on the Indian economy, and in particular, has sent the informal sector into a coma. The informal sector consists of small scale manufacturing, most of the construction industry, perhaps three quarters of the remainder of the services sector, and the agricultural sector. Among the worst hit was the agriculture sector.
The globalisation–liberalisation–privatisation policies being implemented in the country by successive governments that have come to power at the Centre since 1991 had already pushed Indian agriculture into deep crisis. The majority of the Indian peasants are small farmers with landholdings of less than one hectare. An important objective of the agricultural reforms being implemented in the name of globalisation is to slowly strangulate these small farmers and drive them out of their lands so that big agribusiness corporations can take them over. And so, for the past two decades, successive governments have been reducing public investment in agriculture, cutting subsidies given on major inputs needed for agriculture (such as fertiliser, electricity and irrigation subsidies), gradually eliminating output support to agriculture (in the form of public procurement of agricultural produce), gradually phasing out subsidised credit given to agriculture by public sector banks, and allowing imports of heavily subsidised agricultural produce from the developed countries into India. These policies have driven the hardy Indian farmers into such despair that more than 3 lakh farmers have committed suicide since mid-1990s, the largest recorded wave of such deaths in history.
Two consecutive years of drought, made worse by Modi Government’s anti-farmer policies, further worsened this crisis. And then, in the third year (2016), just when farmers were hoping for better days due to a better monsoon, and were about to harvest their kharif crop and begin preparations for the sowing of the rabi crop, they were hit by the cyclone of demonetisation, resulting in huge losses and pushing them further into debt.
It was therefore expected that the Finance Minister would announce measures to compensate farmers for the losses suffered by them due to demonetisation, and also take steps to address the acute crisis gripping the agricultural sector, in his Budget 2017–18.
True to form, the mainstream media has hailed the latest budget presented by Jaitley as a pro-farmer budget one that would give a fillip to agriculture. Just like it had done for last year’s budget. We examine the claims made by the Finance Minister and the Prime Minister about the pro-farmer nature of Budget 2017–18 and repeated sycophantically by the media in this article.
Doubling Farmers Income?
In his budget speech, the Finance Minister has repeated his promise made last year to double farmers’ incomes in five years, a promise that has also been repeated by the Prime Minister. But just like last year, Jaitley has not clarified whether he means to double nominal incomes or real incomes; and just like last year, there is no roadmap of how he plans to make this happen. In fact, a member of the official NITI Aayog, Bibek Debroy, clarified in a television interview last year that the doubling was meant in nominal, not real, terms, that is, not after discounting for inflation. In such terms incomes could double anyway, even without “aiming”! In other words, the declaration is a complete fraud.
To get an idea of the crisis gripping Indian agriculture, the following statistics should suffice: For nearly 70% of Indian small farmers who have land holdings of less than 1 hectare, total income from all sources (cultivation, farming of animals, non-farm business and wages) was less than consumption expenditure (Table 1).
Table 1: Small Farmer Households, All India, 2012–13:
Average Monthly Income and Expenditure
|Size class of land possessed||Number of households as % of total||Total Income from all sources||Total Consumption Expenditure|
|0.01 – 0.40 ha||31.9%||4152||5401|
|0.41 – 1.00 ha||34.9%||5247||6020|
This has led to a huge increase in rural indebtedness. The most extensive survey of farm households to date conducted by the National Sample Survey Office (NSSO) in 2012–13 found 52% of the total agricultural households in the country to be in debt. The average debt is Rs 47,000 per agricultural household, in a country where the yearly income from cultivation per household is Rs 36,972.
These statistics make it clear that to tackle the agricultural crisis, which is pushing thousands of farmers to commit suicide every year, the government needs to make farming profitable by reducing input costs by increasing subsidies on fertilisers, electricity, water, etc., providing output price support, increase public investment in agriculture—which is absolutely essential for agricultural growth, and take big bang steps to tackle the debt crisis gripping Indian farmers by waiving their debts in a big way, and freeing small farmers from the stranglehold of moneylenders and taking steps to make institutional credit available to them at subsidised rates.
Budget 2017–18 addresses none of these issues. The BJP has made a complete U-Turn on its its election promise made at the time of the 2014 Lok Sabha elections to provide farmers Minimum Support Prices (MSP) that would ensure them a 50% profit over cost of production. There is no mention of remunerative prices in the budget. MSP of most crops are far below even the cost of production. There is complete silence on the issue of strengthening public procurement of farm produce, and expansion of storage. While fertiliser prices are sharply rising, fertiliser subsidy stands still at Rs 70,000 crore in 2016–17 RE and 2017–18 BE. The government has made no attempt to pass on the sharp fall in international oil prices to farmers—it has instead used the fall to increase its revenues by increasing excise duties on the petroleum sector: while annual average price of crude oil sharply fell from $105 per barrel in 2013–14 to around $46 per barrel in 2015–16 and 2016–17, the retail price of diesel (in Delhi) came down slightly from around Rs 55 per litre in March 2014 to Rs 48 per litre in March 2016, and has once again risen to Rs 59 per litre by end-January 2017.
The Farm Credit Fraud
The Finance Minister does not even make a mention of the growing indebtedness gripping Indian farmers, forget about taking steps to waive their debts. On the other hand, Jaitley’s announcement that farm credit target is being revised from Rs 9.5 lakh crore in 2016–17 to Rs 10 lakh crore in 2017–18 hit the headlines in several newspapers. But this is actually a farcical announcement! This number does not appear anywhere in the budget. Why? Because it is not a government allocation, but simply a target for the banks to provide loans.
The Centre’s actual contribution is through the interest subsidy provided on these loans. Interestingly, the budget for interest subsidy remains the same at Rs 15,000 crores, even though the credit target has been raised. So, farm subsidies are not being increased here too.
More importantly, who does this Rs 10 lakh crore of credit go to? In 2015, the BJP government removed the distinction between direct lending and indirect lending, making it possible for these loans to be given to agri-businesses like Reliance Fresh and not to farmers. As studies have indicated, much of the agricultural credit is actually going to cities. For example, 40% of the agricultural credit in Maharashtra goes to Mumbai! So far as those who are actually farmers are concerned, most of them are actually not eligible for farm loans from banks—tenant farmers do not get bank loans, and neither do a large number of women farmers as they do not have land titles in their name—and nearly 50% of the farmers are women. The Finance Minister has turned a blind eye to these issues.
As regards increasing public investment in agriculture, some isolated announcements have been made. Thus, one issue that caused a lot of hoopla in the media was the allocation of Rs 9,000 crore for the Pradhan Mantri Fasal Bima Yojna (PMFBY). The scheme aims to provide financial support to farmers suffering crop loss/damage arising out of unforeseen events. It has a uniform premium of 2% to be paid by farmers for all kharif crops and 1.5% for all rabi crops (for commercial and horticultural crops, the premium is 5%). The rest of the premium is paid by the government. Actually, the allocation for this year for this scheme has actually fallen—it had been allocated Rs 13,240 crore in 2016–17 RE. Despite this fall, the government claims that the total number of farmers covered under this scheme is going to be increased from 26.5% of all farmers to 40% of farmers. That is strange mathematics indeed!
More importantly, the Rs 13,240 crores spent in 2016–17 under this scheme have not gone to farmers; this amount is actually the subsidy on insurance premium that has been paid to private insurance companies. It was thus a bonanza for the insurance companies; the farmers will benefit from this only if they get insurance claim payments. How many farmers benefited under this scheme? The Finance Minister was silent on this in his budget speech, as the government has nothing significant to report on this. No wonder that the allocation for PMFBY is only discussed in TV studios and the Parliament; no farmer’s organisation said a word about this scheme. So much for the government’s flagship scheme for farmers.
Another big ticket announcement was the doubling of the long-term irrigation fund with NABARD—from Rs 20,000 crore that was allocated in 2016–17 to Rs 40,000 crore in 2017–18. According to the Finance Minister, this has been done to fast track the implementation of incomplete major and medium irrigation projects. Another corpus fund of Rs 5,000 crore was announced for micro-irrigation. But the Finance Minister was silent about how much of this corpus was spent in 2016–17, and what irrigation facilities were created with this money.
The Finance Minister also announced the setting up of a Dairy Development Fund with a corpus of Rs 2,000 crore, so as to expand the availability of milk processing facilities and other infrastructure for farmers. But again, like most of his pronouncements, he was only indulging in window-dressing; actual allocation for animal husbandry was only Rs 2,371 crore in 2017–18 BE compared to Rs 1,994 crore revised expenditure of 2016–17.
Record Allocation for MNREGS
Probably the allocation that drew the biggest cheer was the allocation of Rs 48,000 crores for the employment guarantee scheme, MGNREGS—a scheme that had been derisively dismissed by PM Modi only two years ago. Arun Jaitley proclaimed in his budget speech that this allocation was the highest ever, and was a big increase over the allocation of Rs 38,500 crore for this scheme made in the 2016–17 budget. But what he forgot to mention was that actual expenditure under this scheme in 2016–17 was Rs 47,499 crore, implying that the increase over last year’s revised estimates was only Rs 500 crore, or 1%. In real terms, factoring in inflation, it is actually a decline!
Even this large expenditure of last year is no credit to the government. It was forced by the Supreme Court orders in the Swaraj Abhiyan case on the drought.
Furthermore, even this allocation of Rs 48,000 crore is actually very insufficient for a full roll-out of the scheme. MNREGS is a demand driven scheme, adequate resources need to be made available for it whenever there is a demand. Presently, 22 of 34 states and union territories have negative balances in their MNREGA accounts. Their total liabilities have piled up to Rs 3,469 crore. But according to the government, 93% of the funds available for MNREGS have been spent. Additionally, the expenditure for February and March 2017 has still to be made, and to honour only the approved budgets for these two months, an additional nearly Rs 10,013 crore is required. Therefore, total pending liabilities at the end of fiscal 2016–17 under this scheme would be Rs 13,482 crore. Add to this an additional Rs 3,800 crore on account of inflation (at 8%), and that means that to keep the allocations at the same level as 2016–17 RE, the total allocation for 2017–18 needs to be 47,499 + 13,482 + 3,800 = Rs 64,781 crore. The actual allocation for 2017–18 is actually 26% less than this!
In fact, the Supreme Court has stated that the entire demand of the states for work should be met by the Centre—which comes to nearly Rs 80,000 crores! The reality is that the Centre is actually discouraging the states from providing work, inordinately delaying the release of funds, with wage payments to workers delayed by two to three months.
Let us now take a look at the total allocation for agriculture. This is ultimately the most important aspect of the agricultural budget. In actuality, as can be seen from the Table 2, as a percentage of the GDP, total allocations for all agricultural related sectors have actually declined in 2017–18 as compared to the revised estimates for 2016–17.
Table 2: Allocations for Agriculture, Rural Development and Water Resources
|2014–15 Actual||2015–16 Actual||2016–17 RE||2017–18 BE|
|1||Ministry of Agriculture and Farmers’ Welfare||25,917||22,092||48,073||51,026|
|2||Ministry of Finance, Interest Subsidy on Short term farm credit||6,000||13,000||–|
|3||Ministry of Rural Development||69,817||78,945||97,760||10,7758|
|5||Total: 1+2+3+4 = 5||1,07,214||1,20,899||1,50,589||1,65,671|
|7||Total Agriculture Spending (5) as % of GDP||0.86||0.88||1.0||0.98|
As a percentage of GDP, total spending on all agriculture related sectors is just 0.9% of GDP. This, for a sector on which 60% of the population depend for their livelihoods!
Clearly, Modi and Jaitley are not interested in alleviating any of the distress caused by the disastrous demonetisation policy decision of November 8, 2016, and are ruthlessly continuing with the neoliberal agricultural reforms that are strangulating Indian agriculture and pushing lakhs of farmers to committing suicides.