[Editorial Analysis] No budget for farmers

Mains Paper 3: Economy

Prelims level: Macro-economic effect

Mains level: Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System objectives, functioning, limitations


• The proposed Rs 6,000 annual direct income support to small and marginal farmers is a drop in the ocean.

• States like Telangana and Odisha have done much better with their Rythu Bandhu and Kalia schemes respectively.

• The Modi government had a golden chance to compensate farmers for their losses due to low prices.

• On the contrary, the middle-class got better income tax sops through raised exemption limits, which only shows a clear bias in policy that implicitly discriminates against farmers.

Macro-economic effect

• The macro-economists and bankers may be happy that the damage to the fisc has been contained and no loan waivers announced except enhanced interest subvention on loans.

• It must be seen that this Rs 72,000 crore as direct income support to farmers is nowhere near the annual loss of about Rs 2,65,000 crore that farmers have been suffering in recent years because of the low prices they have received due to restrictive marketing and trade policies.

• Until major marketing reforms are initiated, there is no hope of doubling farmers’ real incomes by 2022-23.

• The enhanced interest subvention only leads to diversion of funds from agriculture to non-agriculture uses.

• There is ample evidence that in some states agri-credit is even more than the value of agri-output! So, this scheme of interest subvention needs to be reviewed.

• The real need is to expand the reach of farmers to institutional credit.

• The Kisan Credit Card (KCC) was an innovative policy of the Vajpayee government, but the latest survey of NABARD on financial inclusion (2015-16) shows that only about 10 per cent of farmers are using these cards.

• One needs to understand the constraints and find solutions to expand and deepen its coverage.

• The schemes for cow protection and upgrading their breeds and having a separate outfit for fisheries are steps in the right direction, but they cannot make any difference to the current problems faced by farmers.

• It will take years before any of these schemes can deliver.

• Increasing milk production, without its pricing being competitive and remunerative to farmers, may not do much benefit to farmers.

Subsidizing fertilizer

• Similarly, fertiliser subsidies can also be made through direct income support to farmers even those with holdings up to the size of four hectares.

• The states can be encouraged to put even power subsidy through direct income transfer and charge the market price for power, recovering at least its cost of supply.

• These can then be fundamental reforms, switching from the price policy approach to income policy approach, for helping the small and marginal farmers and poor consumers.

• If the Congress or the Third Front can do this, it will be good economics and good politics.

• The Modi government has frittered away that opportunity, which may extract a political price.

• The stray cow menace in several states, especially UP, and rising cane arrears, which may cross Rs 12,000 crore in UP alone, can inflict pain on the NDA when it seeks re-election.

Way forward

• The current problems of the peasantry are not on the supply, but on the demand side; it is about low prices.

• The NDA’s much touted formula of 50 per cent margin over cost A2+FL has failed miserably.

• The Bhavantar Bhugtan Yojana (BBY) in Madhya Pradesh did not succeed and the BJP lost assembly elections in three states.

• The NDA decision to risk its second term makes the game easier for Rahul Gandhi, who has already promised some minimum income for the poor.

• Depending on how big it is, when it is delivered, and how, we will know if it acts as a pre-emptive (or surgical) strike on the Modi government.


Prelims Questions:

Q.1) In the context of National Commission for Safai Karamcharis and Southern Zonal Council, which of the following statements is/are correct?

A. Both are Statutory Bodies.

B. The National Commission for Safai Karamcharis submits its annual report to the President while the Southern Zonal Council submits its annual report to the Union Home Minister.

Which of the statements given above is/are correct?

i. A only

ii. B only

iii. Both A and B

iv. Neither of the above

Correct Answer: I

Mains Questions:

MASS POVERTY. Critically Examine

Share article