Though the farmers were not an issue in the general elections they now hold the fort for the world’s fastest growing economy despite being in debt and crippled by climate change
The largest democratic exercise in the world—general elections 2019 of India—is coming to an end. On May 23, the country would know its new government. And the preferences of 900 million electorates would reflect that. But, what stands out in the over-a-month-long campaign is near inaudible issues that matter to the vast number of electorates.
One of the least talked about issues in the elections is the precipitating, rather exploding, agrarian crisis. Not to discount the overall rural distress.
This is surprising given that every fourth voter is a farmer, a distressed farmer at the edge of an economic collapse. This perhaps is the reason why the general elections of 2019 are termed as the “non-issue elections”.
If the elections are won not on the basis of these pressing issues, then the question arises: what does a government mean to these people who must have reposed faith on the system? Irrespective of the election outcome, and whoever forms the next government, it is going to be a never seen before agrarian crisis. Down To Earth reported in 2015 that if the agrarian crisis is not addressed it would lead to a collapse of the national economy. That is why?
As reports, both from government and credible non-government sources, show Indian economy has already entered into a slowdown. Finance Minister Arun Jaitley has also admitted this in his recent blog. There is not a single sector that has shown signs of growth, and as we don’t have credible data so we can’t also say for sure how deep is the economic crisis.
But, for a country like India, this national slowdown has umbilical origin in the agriculture sector. And this is where the next government will be staring at an electoral hara-kiri.
Currently, India’s GDP is dominantly driven by consumption; in 2017-18 it accounted for 95 per cent of it. This is because other contributors to GDP have slowed down. Similarly, public investment is another driver of GDP but that has also reduced drastically in recent months. So, consumers, people like you and me, are the main economic players.
But, close to 50 per cent of the consumers are farmers, or belong to farming households that earn primarily from agriculture. It means, a sector already in crisis is holding the fort of the “fastest growing economy” of the world. Will it be able to sustain it? A big no and that is the severe warning for the overall economy.
During the last five years, agriculture suffered the most, both at the government and nature’s hands. This has crippled their economic base. Even a very high growth rate in future will also take years to bring them to their earlier income level. Let’s have a quick peek into their economic condition.
During 2014-15 and 2018-19, agriculture grew at average 2.9 per cent. In comparison to five years before 2014, agriculture sector grew at average 4.3 per cent; often termed as the fastest growth rate in decades. According to economist Ashok Gulati, the growth of Gross Value Added from the agriculture sector (including forestry and fishing) will be 2.7 per cent in 2018-19 while it was 5 per cent in 2017-18.
It basically means, earning of farmers has not been growing, even to match the overall inflation rate. It also means farmers don’t have money to spend. And they are going to sustain the GDP growth!
Income of farmers on real price (adjusted for inflation) grew only 3.8 per cent, according to the initial findings of a study by NITI Aayog — the first of its kind — on year-on-year growth in their earnings. At this rate, the Modi government’s target of doubling farmers’ income by 2022 will not be met. It will take at least 25 years from now.
Further, according to an assessment by Organisation for Economic Cooperation and Development and Indian Council for Research in International Economic Relations, farm revenue fell 6 per cent per year for 2014-16—the period in question. It can be argued that the promise to double is based on very low base income thus doable.
According to Ramesh Chand, a member of the NITI Aayog, productivity of India’s crop sector has grown at the rate of 3.1 per cent during 2001-2014. At this rate, income from farms will go up by 18.7 per cent in seven years (2021).
But the government wants to add on the income from livestock as well to achieve the target. If this is added, by 2022, income would go up by 27.5 per cent. But by combining increase in all potential sources of income for farmers, a rise of 107.5 per cent can be achieved by 2025.
There is another factor that has been ravaging the rural economy, particularly that of the farmers. It is the continuous losses due to extreme weather events and natural disasters like drought and floods.
What is scary is the frequency of droughts–particularly in the first 18 years of the 21st century—that majorly bring down farmers’ income. During the period of 1871-2002, there were 23 major drought years. But in 16 years after this, the country has already faced four severe droughts. More to it, unseasonal rains like in 2014 and 2015 have further damaged crops. These disasters have added to the economic decline of farmers who now at an average have Rs 74,000 per capita debt.
Coming back to current year, there are 300 districts that are under severe drought now. The India Meteorological Department has already hinted of a marginally deficit monsoon. And the threat of an El Nino is hovering around. There are reports of the monsoon getting delayed in arrival. While it might not have an impact on overall performance, but monsoon spread and distribution is a major concern for farmers keeping in mind their crop cycle.
Annually India loses about 2 per cent of its GDP due to natural disasters. The Economic Survey 2017-18 has already warned about the impact of climate change on the income of farmers.
“Climate change might reduce farm incomes by up to 20-25 per cent in the medium term,” said the survey. Citing it as a big threat to the country’s most employment-intensive economic sector, it also flagged red herrings for the doubling of farmers’ income by 2022.
But the impact of climate change on farm income is more pronounced in the case of rain-fed areas, home to 60 per cent of operational landholdings. These areas account for more than 60 per cent of farmers in the country.
“Once again, these average effects mask significant heterogeneity, with the largest adverse effects of weather shocks being felt in unirrigated areas. Ex-ante it is not clear which direction farm revenues should move in–on the one hand, these shocks reduce yields, but on the other, the lower supply should increase local prices. The results here clearly indicate that the “supply shock” dominates–reductions in yields lead to reduced revenues,” said the survey.
What it means is that a majority of India’s workforce and a key economic driver is in debt. Their hope for a revival of income is bleak, thus, indicating a major financial slowdown in immediate future.
“If agriculture doesn’t perform, the ancillary sectors don’t either, and purchasing power reduces,” Madan Sabnavis, the chief economist with Care Ratings, was quoted in India Today magazine.
This near zero agricultural growth has another worrying impact. Agriculture sector reduces poverty twice the rate of other sectors of the economy. So, agrarian crisis has an overall bearing on the country’s poverty level as well, which we want to eradicate by 2030.
For the new government, this is an inheritance of loss. But it is also the top priority to fix not only for the agricultural sector but also in order to sustain national economic growth.
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