ANGRY FARMERS ARE AT THE ELECTORAL GATE
Last week, we were witness to a Delhi-bound farmers’ rally that originated in western Uttar Pradesh being blocked on the outskirts of the city by the authorities. Predictably, the confrontation turned violent, but mercifully did not result in any casualty. Eventually, the agitated farmers were contained and dispersed.
This was not the first agitation of farmers and will certainly not be the last. Over the last few years, the country has witnessed scores of protests largely due to a prolonged phase of rural distress. As the country moves into the electoral cycle associated with the general election, more such protests are likely. Understandable.
This is the moment when politicians, especially incumbents, are at their most vulnerable—and hence most amenable to cut a deal.
Regardless, this spate of agitations lends itself to the question as to why is the Indian farmer so angry. Unaddressed, it may well be a key factor influencing the upcoming round of elections to state assemblies and the general election due next year. In the elections to the state assemblies of Gujarat in 2017 and Karnataka this year, we saw glimpses of this playing out when farmer unrest intersected with other anti-incumbency factors in play.
This column and several others in this newspaper have repeatedly dwelled on the problem of growing farm distress. It became apparent after the collapse of the global commodity markets in 2009, leading to a consistent fall in prices of farm products. Given the growing linkages of India and the world economy, this impact has no doubt percolated to domestic markets as well.
Combined with the structural shifts—particularly the move towards value- added agriculture, like horticulture, and increasing mechanization—the crisis started assuming acute proportions.
While the Bharatiya Janata Party (Bjp)-led National Democratic Alli- ance (NDA) government is right in arguing that it inherited the crisis, it is culpable for overlooking the problem and failure to come up with solutions that go beyond the predictable. As the incumbent, it is its dharma to do so—like it has in resolving the vexing bad debt problem, often caused by errant industrialists abusing the loopholes in the system, by putting in place a new and credible winding up process for firms.
To be fair, they have attempted to break the mould, but have fallen short. The crop insurance scheme launched two years ago is a good example. Unfortunately, it has not got the desired currency among farmers. The scheme envisages farmers pay between 1.5-2% of the insurance premium with the balance absorbed equally by the centre and state governments. Under the scheme dubbed Pradhan Mantri Fasal Bima Yojana, the enrolments declined from 57.3 million in 2016-17 to 48.4 million in 2017-18.
Similarly, not just the BJP, but every other state government up against farm distress has resorted to the time-tested solution of farm loan waivers. Yes, it has populist overtones, but at the same time, it does provide immediate relief. (Like the write-off of bad loans extended to Indian industry; another matter though that it got abused and became a business model for some).
More recently, the NDA has proposed a variant of the minimum support price model, which provides a safety net to crops other than foodgrains.
What is missing though is a longterm solution which hits the reset on how the Indian farmer is viewed by public policy. Fundamentally, the farmer is not risk-averse; in fact, one would argue that they are more risk friendly than their counterparts in Indian industry.
The risks underlying farming lead to steep fluctuations in their income streams, which can unsettle any business leave alone a rural household—the unfortunate outcome is inevitably a debt trap.
The missing element in this ecosystem is risk mitigation mechanisms, which the farmer can leverage to protect against vagaries like abnormal weather, pest attacks and price shocks. Heartening to note that some changes are being initiated; last week, the BSE launched agricultural commodity derivatives. However, the pace of change has to pick up if Indian farming is to regain its place in the sun.
Anil Padmanabhan is executive editor of Mint and writes every week on the intersection of politics and economics. His Twitter handle is @capitalcalculus