Modinomics = Corporatonomics Part II: Budgets and Agriculture

In the previous part of this article, we had shown that the government, if it wants, can raise enough resources to implement a whole slew of welfare measures. But instead of doing that, it is more interested in giving away huge subsidies to the tune of several lakh crore rupees to the corporate houses. In this part, we take a look at Modi Government’s policies with regards to the severe agrarian crisis gripping the country.

PM Kisan Samman scheme

The neoliberal reforms being implemented in the country for the past nearly three decades have pushed Indian agriculture into a deep crisis. Public investment in agriculture has been falling. Both input subsidies (such as fertiliser, electricity and irrigation subsidies) and output support to farmers (in the form of public procurement of agricultural produce) have been drastically cut. Farmers are finding it difficult to access loans from banks at subsidised rates, pushing them into clutches of moneylenders. Consequently, for the majority of India’s farmers, who are small farmers with land holdings of less than 1 hectare, their total income from all sources (cultivation, farming of animals, non-farm business and wages) has fallen to less than their consumption expenditure. It has led to a huge increase in rural indebtedness; over the two decades 1992–2012, the incidence of indebtedness among cultivator households has nearly doubled. These neoliberal policies drove the hardy Indian farmers into such despair that more than 3.5 lakh farmers had committed suicide over the two decades to 2014—something that did not happen even during the days of the British Raj.

Narendra Modi and the BJP swept to power in the 2014 Lok Sabha elections on the back of a whole slew of extravagant promises to farmers. After coming to power, it promised to double the income of all farmers by 2022.

However, ever since it assumed power, the agricultural policies of the Modi Government have only worsened the crisis gripping Indian agriculture. And so, the past year saw India swept by over a dozen farmer marches, including the epic march by over one lakh farmers from all over the country to the country’s capital Delhi in November 2018.

With elections looming, in a desperate bid to win over farmers, the Modi Government in its Interim Budget 2019–20 announced a PM Kisan Samman Nidhi scheme to provide income support of Rs 6,000 per year to small and marginal farmers. Under the scheme, around 12 crore farmers with small landholdings of up to two hectares, will be provided direct income support of Rs 6,000 per year, in three equal instalments of Rs 2,000 each. In a naked attempt to buy votes of farmers, the Finance Minister Goyal announced that first instalment would be transferred immediately, before March 31, 2019. Landless farmers, tenant farmers and sharecroppers will not benefit from the scheme.

The amount translates into a mere Rs 500 per month—which is a joke, considering the depth of the farm crisis. The scheme is even weaker than the income support to farmers being given in Odisha and Telengana, which give farmers Rs 10,000 per year, and have no landholding limits, apart from other benefits.

Betraying farmers

On the other hand, the budget is silent on the important issue of farm loan waiver. It would have cost the government at the most Rs 3 lakh crore, while benefiting crores of farmers across the country. The injustice of this becomes all the more apparent when one takes note of the fact that the loan waivers given by the Modi Government to corporate houses total several times more than this.

On the issue of implementing the most crucial recommendation of the Swaminathan Commission, that farmers should be given MSP which is 50% over the C2 cost of production (which is the comprehensive cost of production), in this year’s budget speech too, the Finance Minister repeats Jaitley’s lie of last year that the government has “fixed the minimum support price (MSP) of all 22 crops at minimum 50% more than the cost.” During the year 2018–19, the government has announced increases in MSP for kharif and rabi crops, but the increase is much below the C2+50% price recommended by the Swaminathan Commission (see Table 1).

Whatever be the MSP declared, another problem faced by farmers is that most farmers do not get this price for their crops. Government procurement operations cover only a few crops, mainly rice, wheat, cotton and occasionally pulses. (While there is no government procurement per se in sugarcane, mills are legally obligated to buy cane from farmers at prices fixed by government, an effective MSP-like arrangement.) The Shanta Kumar committee admits that 94% of farmers do not get MSP, even if it is low.

The finance minister had admitted this problem in his budget speech last year. He had proposed that “Niti Aayog, in consultation with Central and State Governments, will put in place a fool-proof mechanism so that farmers will get adequate price for their produce.” More than a year has gone by; the government has presented two budgets, but there has been no financial allocation to implement this promise in either of the budgets! Meanwhile, a few more thousand farmers have committed suicide.

Government procurement from farmers mainly comes under the budget head, ‘food subsidy’. This year’s budget papers reveal the shocking fact that actual expenditure on food subsidy had been only Rs 1,05,864 crore in 2017–18—a reduction of 27% over the revised expenditure for food subsidy in 2017–18 of Rs 1,45,892 crore as given in the 2018–19 budget papers (see Table 2). Do the budget estimates have any meaning under the Modi Government? It only means that despite the worsening agrarian crisis, the government is not interested in expanding its procurement of foodgrains. The revised estimate for food subsidy in 2018–19 is given as Rs 1,77,874 crore. Considering last year’s performance, and the slipping fiscal deficit, it is doubtful if the government has actually spent this amount.

A scheme about which the Finance Minister makes no mention in his budget speech is the much-hyped Pradhan Mantri Fasal Bima Yojana (Table 3). The reason is not far to seek—the scheme has turned out to be a huge scam. The scheme aims to provide financial support to farmers suffering crop loss/damage arising out of unforeseen events. The farmer pays the premium at a subsidised rate, the rest is borne by the Centre and the respective State. While the allocation for this scheme has gone up by nearly five times over the five Modi Government budgets (2018–19 RE over 2014–15 A), several reports have come in the media showing how this scheme has turned out to be a way of transferring public funds to corporations—in the name of public welfare, it has resulted in windfall profits for insurance companies. The scheme has enabled insurance companies to earn a whopping Rs 15,795 crore as profit in just the last two years. They got a gross premium of Rs 22,362.11 crore and paid an insurance claim of Rs 15,902.47 crore to 3,01,26,403 farmers in 2016–17; and in 2017–18, they disbursed claims of Rs 15,710.25 crore against a premium of Rs 25,045.87 crore to 1,26,01,048 farmers.[i] This year, the scheme has been allocated Rs 14,000 crore, as compared to Rs 13,000 crore allocated last year.

The Finance Minister had announced the Pradhan Mantri Krishi Sinchayee Yojana (prime minister’s irrigation scheme) with much fanfare in his very first budget of 2014–15. The Economic Survey of 2017–18 admits that the percentage of net irrigated area to the total cropped area was 34.5% that year. Despite this situation, this scheme has always been underfunded. Overall, the total expenditure on this scheme during the five years of the Modi Government (2018–19 RE over 2014–15 A) has increased by only 8.5% (CAGR), which is barely enough to beat inflation (see Table 3).

The flagship scheme of the Central government for creating robust pre- and post-harvest infrastructure for agriculture is the Rashtriya Krishi Vikas Yojana. However, allocation for this has been halved over the five budgets of the Modi Government, from Rs 8,443 crore in 2014–15 A to Rs 3,600 crore in 2018–19; the allocation for 2019–20 has been marginally increased to Rs 3,800 crore.

In the long-term, the only solution to the crisis gripping Indian agriculture is promoting organic or sustainable farming techniques in agriculture. However, the budget for a very important scheme related to this, called Paramparagat Krishi Vikas Yojana, continues to stagnate at a lowly Rs 325 crore as compared to the allocation in the 2018–19 BE of Rs 360 crore. The footnote to the budget document states that the National Project on Organic Farming is meant to promote organic farming techniques in the country, but its allocation is a princely Rs 2 crore! The National Mission on Oil Seed and Oil Palm, which had been allocated a meagre Rs 400 crore in 2018–19 BE, has now apparently been abandoned by the government; it has not been given any allocation in the 2019–20 Interim Budget.

An important sector that can help provide some relief from the agrarian crisis is the livestock sub-sector (includes sectors like dairy, poultry and meat) and fisheries sub-sector. The livestock sector provides additional income to a large section of small and marginal farmers; it is estimated that fishing, aquaculture and allied activities provide livelihood to more than 14 million people. While the Finance Minister in his budget speech claimed that the government gives high priority to the animal husbandry sector, this is only empty rhetoric; the allocation for the Department of Animal Husbandry, Dairy and Fisheries is very low in absolute terms, only Rs 3,100 crore in 2019–20; and has actually declined as compared to 2018–19 RE (Rs 3,273 crore). As a percentage of the budget outlay, it is a miniscule 0.11%. Within this, the allocation for what is called the white revolution has significantly declined from Rs 2,431 crore in 2018–19 RE to Rs 2,140 in 2019–20 BE. Similarly, funds provisioned under Blue Revolution, meant for fishery sector, have also declined from their already meagre levels (see Table 4). 

Budget for Rural Development

Conditions in agriculture are intimately tied to the general state of the rural economy, and that is why public spending on rural development is also crucial for the overall development of agriculture. Here the outlays are hugely disappointing. Total allocation for Ministry of Rural Development or MoRD is slated to increase by only 4.7% over the previous year’s revised estimate—not even keeping pace with inflation (Table 5)! Overall, during the Modi Government’s five years, the budget for the Department of Rural Development has gone up by 7.01% (CAGR), which is a fall in real terms. This is also reflected in the fact that the budget for this department as a share of the total budget outlay has fallen from 4.6% to 4.2% over this period.

One important head under the Department of Rural Development is the ‘Pradhan Mantri Avas Yojana – Grameen’. This scheme is the flagship housing scheme of the Modi Government, which replaced the earlier Indira Awas Yojana (IAY) of the UPA government, and promised housing for all by 2022. In his budget speech last year, Jaitley claimed that the government had targeted building 10 million houses by March 2019—51 lakh houses were to be completed by March 2018 and another 51 lakh houses by March 2019. But the allocation for this scheme has fallen from Rs 23,000 crore in 2017–18 BE to Rs 19,900 in 2018–19 RE, a cut of nearly 20% in real terms (Table 5). Obviously, the government has no intention of constructing many houses under this scheme, it is just another of Jaitley’s fibs. This is borne out by figures available on the MoRD website: they reveal that 23.5 lakh houses were constructed in 2017–18 and another 19.1 lakh in 2018–19 (as on April 9, 2019)—that is, the total number of houses built under this scheme is less than half of the target!  

The Pradhan Mantri Gram Sadak Yojana (PMGSY) is a central scheme to build all-weather roads to connect 1.6 lakh eligible unconnected habitations. The Finance Minister claims in his budget speech that more than 90% of the habitations have been connected with pucca roads, and the task would soon be completed. This, despite the fact that for the last four years, the allocation under this scheme has remained constant at Rs 19,000 crore, and the money actually spent has been 10–20% less than this (Table 5). The CAG recently pointed out several irregularities under this scheme, including misreporting.[i] Clearly, much of these roads are being built only on paper.

MGNREGA

The most important scheme under the Department of Rural Development is obviously the government’s rural employment guarantee programme under the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA). It guarantees a minimum of 100 days of employment in a year to every willing household. Significantly, it guarantees time bound employment, within 15 days of making such a requisition, failing which it promises an unemployment allowance. This scheme has the potential to lessen the crisis gripping the rural areas and improve food security. Numerous studies have shown that NREGA has had several positive effects, including increasing rural wages, enabling better access to food and thereby reducing hunger, and reducing distress migration from rural areas.

In its latest 2019–20 budget, the Modi government has cut the MGNREGA budget allocation even in absolute terms, to Rs 60,000 crore, as compared to the 2018–19 revised estimate of Rs 61,084 crore (Table 5). Of this, Rs 7,568 crore will go to meet the unpaid wages of the previous year. This means that just to maintain the budget level at last year, the budget for this year should have been 61,084 + 4,887 (inflation at 8%) + 7,568 = Rs 73,539 crore. The budget allocation is 18% less than this.

Even if the Centre had allocated the desired funds to keep the allocation at the same level as last year, it would have been insufficient for a full roll-out of the scheme. MNREGS is a demand-driven scheme, it guarantees 100 days of employment to all those who desire it (one member per household). Of course, this is a very inadequate employment guarantee, but at least it is something. To make available this many days of employment to all those desiring work, and give them timely wage, a minimum allocation of at least Rs 88,000 crore is needed.[i] But the actual allocation by the Modi government has been way below this. In fact, the allocation by the Modi government has been so low that this scheme has been able to make available an average of just 46 person-days of employment per household during all the five years of Modi rule (Table 6). It is thus clear that the MGNREGS has stopped being a demand-driven programme altogether; its scale depends rather on the amount of resources made available for it—a clear violation of the Act. The primary sufferers of this cut in funds are some of the poorest and most vulnerable workers of rural India.

Total allocation for all agriculture related sectors

Let us now take a look at the budget for all agriculture related sectors (Ministry of Agriculture and Farmers’ Welfare, Ministry of Rural Development, Ministry of Water Resources as well as the Department of Fertilisers). As can be seen from Table 7, the total spending for all these ministries, including the Income Support Scheme, has fallen as a percentage of the budget outlay over the five Modi Government budgets, 2014 to 2018. This year, it has marginally increased, due to the huge increase in income support scheme. Exclude that, and it comes down from 11.58% of the budget outlay to only 9.65%—a fall of nearly 2 percentage points. And that is what really matters—giving an income support which is actually a bribe during elections does not really improve income from agriculture.

Even after taking into account the huge outlay for income support, as a percentage of the GDP, total agricultural spending during the five Modi budgets has significantly fallen; so much so, that even in 2019–20, it has yet to reach the 2014–15 budget estimate level.

But what is more important is that as a percentage of GDP, total spending on all agriculture related sectors is just around 1.6% of GDP. This, for a sector on which more than 50% of the population depend for their livelihoods!

Falling rate of growth of agriculture during Modi regime

It is because of these anti-farmer policies of the Modi Government that agricultural growth rate under the Modi government over the five year period 2014 to 2019 has declined to an average of 2.9%, compared to 4.3% during the UPA-II years, and 3.7% for the full 10 years of UPA. This is based on the latest GDP estimates released by the CSO, and is despite the manipulation of GDP data by the Modi Government.[i]

This assault on Indian agriculture pushed the hardy Indian farmers into such despair that even after the Modi Government arm-twisted the National Crime Records Bureau (NCRB) to make major changes in its methodology, the number of farm suicides increased by 40% during the first year of the Modi Government. The government panicked, and got the NCRB to stop releasing anymore data on farm suicides. The Union Agriculture Minister Radhamohan Singh in fact unashamedly admitted in Parliament on December 18, 2018, that the NCRB, which collects such data, has not published figures of farmer suicides since 2016.

 

Solving the agrarian crisis

What is the best way of solving the agrarian crisis? While the NYAY scheme of the Congress is welcome, it does not really attack the roots of the agricultural crisis—that agriculture is becoming unprofitable. The other biggest limitation of the NYAY scheme is that it too engages in targeting, and is only targeted at the poorest 20% households, whereas the entire agricultural sector is in crisis.

Therefore, what is more urgently required is that:

  • The government should increase its investment in agriculture towards making agriculture sustainable. As discussed above, if the government reduces the enormous subsidies and transfers being given to corporate houses, it can easily double or even triple its total investment on all agriculture related sectors:
    • Outlay for Ministry of Agriculture can be trebled from Rs 65,800 crore (excluding income support) to Rs 2 lakh crore.
    • Outlay for Ministry of Rural Development (excluding NREGA and excluding National Social Assistance Programme – about which we discuss later) can be increased from Rs 1.34 lakh crore to Rs 2.8 lakh crore in the minimum.
  • These investments in agriculture and related sectors will need to be directed towards:
    • Increasing investment in irrigation facilities, especially sprinkler and drip irrigation projects, water shed development and tank rehabilitation.
    • Providing subsidised crop loans to farmers, including to women-headed families and tenant farmers, equal to their cost of production.
    • Providing subsidised and compulsory crop insurance to all farmers through public sector insurance companies;
    • Implementing plans and providing subsidised finance to promote dairy farming and village-based industries to increase rural incomes, and efforts must be made to do this through village cooperatives.
    • Shifting the entire orientation of agriculture from the present chemical intensive, external input oriented industrial agriculture to alternate technologies that promote sustainable, environment friendly, agriculture. For this, the government will need to give priority to schemes like Paramparagat Krishi Vikas Yojana and National Project on Organic Farming.
  • Apart from this, the government will need to boost its investment in the very important rural jobs guarantee scheme or NREGA, and it will need to implement good quality, free / cheap universal basic services including education, health, nutrition and pensions. These measures will of course also call for increasing investment in all these sectors, which as we discuss in a later article are eminently affordable for a government with so many resources as India.
  • The Central Government also needs to take the initiative and provide a one time waiver of all farm loans, including private moneylender loans. The moneylender loans should be declared illegal by passing appropriate legislation, and the bank loan waiver – which should cost at the most Rs 3 lakh crore according to estimates by experts – can be financed through issue of bonds like the government has done for recapitalisation of banks, so that the burden can be distributed over many years.
  • Government procurement of crops should take place at 50% above cost of production, where cost of production is defined as C2 production cost. It should also expand procurement of foodgrains, and also expand the procurement to other important crops like oilseeds and pulses, all which it should distribute through a universalised public distribution system. This implies replacing the targeted public distribution system by the previous universal public distribution system, in which, along with foodgrains, government should also distribute other food essentials like pulses and cooking oil to all We have discussed the costs for this elsewhere, and they are not much.

What is the real objective of the Modi Government? 

Why is the Modi Government only giving empty promises and not taking concrete doable steps to solve the agrarian crisis. This becomes clear from a perusal of two official documents:

A recent document of the NITI Aayog says:

“With the corporate sector keen on investing in agribusiness to harness the emerging opportunities in domestic and global markets, time is opportune for reforms that would provide healthy business environment for this sector. Small scale has been a major constraint on the growth of this industry.”[ii]

The paper also calls for allowing corporate sector to side-step the APMCs and procure directly from the cultivator.

Another official document of the government lays out a target of bringing down the population engaged in agriculture from the existing 57% to 38% over the next five years, by 2022.[iii] Interestingly, this is elucidated in a report of the National Skill Development Council. The reason is obvious—after the farmers have been pushed out of their farms, they will need to be trained to work as workers in the factories.

The orientation is thus clear. Allow agribusiness corporations into Indian farming, let them take control of procurement. Push out the small farmers from agriculture, and transform Indian agriculture into corporate farming.

There is little room for doubt. The Modi Government is the most anti-farmer government that has come to power at the Centre.

[i]  “New MSP: Govt fails to meet Swaminathan standards, yet again”, July 5, 2018, https://www.downtoearth.org.in;  “The reality behind the MSP hike on Rabi crops”, October 26, 2018, https://countercurrents.org.

[ii]    “Firms earned Rs 15,795 crore in 2 years of Fasal Bima Yojana”, November 14, 2018, https://www.tribuneindia.com.

[iii]    “Numbers That Count: An Assessment of the Union Budgets of NDA II”, CBGA, February 2019, http://www.cbgaindia.org.

[iv]    “Budget 2019: ‘Anything Less Than Rs 88,000 Crore for MGNREGA Is Insufficient”, February 3, 2019, https://thewire.in.

[v]    Ashok Gulati, “From plate to plough: No achhe din for the farmer”, March 20, 2019, https://indianexpress.com.

[vi]    Aspects of India’s Economy, Nos. 66–67, May 2017, Part IV, http://www.rupe-india.org.

[vii]    Devinder Sharma, “How World Bank’s Economic Chakravyuh Is Trapping Indian Farmers”, September 30, 2017, https://www.ecologise.in.

 

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