ANIL PAD­MAN­AB­HAN

AN­GRY FARM­ERS ARE AT THE ELEC­TORAL GATE

Mint Asia ST - - Views Myview -

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

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