The first advance estimates of GDP growth, at 2011-12 constant prices, put the growth for FY16 at 7.6 per cent over the previous year. This is the highest growth rate in the first four years of the forgotten 12th Five-Year Plan. No wonder this makes the Narendra Modi-led NDA government somewhat upbeat. Much of the focus of the new government is on Make in India, especially in the manufacturing sector. But the manufacturing sector has not yet registered impressive growth, which makes several economists sceptical of the high overall GDP growth rates.
However, very few are talking about agriculture, whose pulse is sinking by the day. The optimistic growth forecast for FY16 is 1.1 per cent over the previous year’s minus 0.2 per cent. The first two years of the NDA government will give an average agri GDP growth of just 0.45 per cent, way below even the population growth rate of about 1.3 to 1.4 per cent. This, in effect, means that per capita income in agriculture has declined in the first two years of the Modi government. In contrast, the two terminal years of the UPA government registered an average agri GDP growth of 2.85 per cent (1.5 per cent in FY13 and 4.2 per cent in FY14).
Overall, the first four years of the 12th Five-Year Plan have registered an average agri GDP growth of just 1.65 per cent against an overall GDP growth rate of 6.75 per cent, a ratio of roughly 1:4, while the target always hovers around 1:2 — 4 per cent for agri GDP and 8 per cent for overall GDP. This may be the worst performance of agriculture in any Plan since the reforms began in 1991.
It is important to put these facts on the table because almost half of India’s workforce is engaged in agriculture, and almost three-fourths of India’s poor and malnourished reside in rural areas, where the main occupation is agriculture. What is the purpose of public policy? Is it not to alleviate poverty and malnutrition at the fastest rate possible? The UPA government in its second term had focused on the “dole” model — the National Food Security Act and the MGNREGA — and was ready to throw thousands of crores on these schemes in the hope that they would wipe out poverty and malnutrition. The intention was right but the model was not only conceptually weak but the programmes were destined to fail given the large leakages in them. The PDS had leakages of more than 40 per cent, and is actually nothing short of an annual scam in the country. Almost Rs 1,25,000 crore is shown in the budget as food subsidy for this flagship programme but few know that another Rs 70,000 crore-plus is pushed under the carpet as unpaid bills of the FCI. Similarly, the MGNREGA, though supposed to be self-targeting and a fall-back programme in years of distress (like droughts), not only has high leakages but the most important criticism, which even P. Chidambaram pointed out, is that the quality of assets created is poor, making it more like a dole. It is much better to spend money on programmes like the Pradhan Mantri Gram Sadak Yojana, which helps in building infrastructure and contributes to faster growth and reduction of poverty.
So I am not in favour of the dole model of the PDS and the MGNREGA type, but would support the growth model with at least one rider. It is not just growth per se but the nature of growth that also matters a lot if the objective of public policy is to wipe out poverty and malnutrition. It is in this context that agriculture must register at least half the rate of overall GDP growth in the economy. From that angle, targets of 8 per cent of overall GDP growth and 4 per cent for agriculture are fine and on conceptually robust ground. But the actual performance has always lagged a bit, and more so for agriculture, except in the 11th Five-Year Plan (FY08 to FY12), when agri GDP also grew at 4.1 per cent. The result of this high growth in agriculture was that poverty declined three times faster during 2004-11 than during 1993-2004.
The big question, therefore, for the Modi government is: Can it give at least 4 per cent growth in agriculture on a sustainable basis? When I politely asked the PM this in my last brief encounter, his reply was what could we do as these turned out to be drought years. Yes, fair enough, but visionaries and stalwarts are tested in difficult times. If the monsoons were good and prices were remunerative for farmers, they wouldn’t need government support. But today, the situation is grim in agriculture.
Farmers had great hopes from the NDA government, especially because the BJP had promised in its manifesto that it would make Indian agriculture more remunerative, assuring 50 per cent profits over costs. This was a great increase compared to the UPA government years, when most principal crops had profit margins of between 20 to 30 per cent. But the reality of the first two NDA years turned out to be nightmarish for farmers, with profits plunging to less than 5 per cent for most crops.
One after the other, farmer groups, which were great supporters of the Modi government, have been feeling disillusioned and deserting it. Even BJP workers who have links with the farming community whisper about their frustration in private with the agenda of their government, as they know it is elitist, which will accentuate inequality at the cost of simmering discontent in rural areas, for which they will have to pay a heavy political price.
Can the PM and finance minister show some bold moves in the forthcoming budget to put agriculture back on track to 4 per cent growth? I have serious doubts as the agenda has already been hijacked by the elites who want bank loans worth lakhs of crores of rupees to be written off for big business while the honest and hardworking farmer looks up with blank and hopeful eyes.
The writer is Infosys chair professor for Agriculture at Icrier, Delhi