Archive for April, 2016

Fairy Tales about Foreign Investment

During the past two years, the prices received by peasants for various agricultural products, such as potatoes, rubber, cotton, basmati rice, guar, eggs, and milk, have experienced sudden, even catastrophic, declines, in many cases to levels below the cost of production. In some cases, a steep rise in retail prices has been followed by a crash in mandi prices at the time when the peasant brings the crop to the market.

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Peasantry in Fetters

Peasant households in deficit
Even as we note the positive effect of earlier spells of increased public expenditure, we also need to note certain underlying negative features of India’s agrarian scene, which appear resilient even to periodic bouts of higher growth.

It is striking that even in the earlier period (2004-12), when terms of trade for agriculture were improving and growth rates were higher, this improvement appears to have had only a limited impact on the vast mass of peasantry. Data from the 70th Round of the National Sample Survey (2012-13) show that average farmer household income from all sources was Rs 6,426 per month, of which Rs 2,071 came from wages, and Rs 512 from non-farm business; the rest came from cultivation and farming of animals. For almost 70 per cent of farmer households, total income from all sources (cultivation, farming of animals, non-farm business and wages) was less than consumption expenditure. That is, these households were running a deficit.

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Post-2004 Spell of Growth Over

Deeper crisis
The drought has brought out starkly the precarious state of Indian agriculture; but the crisis is deeper than the drought. Its most extreme and well-known manifestation is the over three lakh peasant suicides that have taken place since 1998. The crisis has many visible or quantifiable indicators: rising costs of production; falling incomes; rising indebtedness; falling investment; spurious, scarce or blackmarketed inputs; sharp fluctuations in farmgate prices; paucity of alternative livelihoods; increasingly unpredictable climatic conditions; and environmental degradation. Its social dimensions are not visible to the naked eye, but these relations undergird the entire structure.

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Drought of Public Spending

The Finance Minister’s claims this year of producing a “pro-farmer”, “pro-poor” Budget were promptly exposed by several commentators, but the official hype had by then served its purpose of packaging the Budget.

In the following article, which will appear in instalments, we place the agriculture-related allocations in the Budget in the context of the state of India’s agriculture today. We make the following points:

(i) As many others have noted, the Budget shows no increase in allocations for agriculture, as a percentage of Gross Domestic Product (GDP). Allocations for rural employment, as a percentage of GDP, have declined to less than 0.3 per cent of GDP.

The Prime Minister’s avowed aim of “doubling” farmer income in five years is meaningless if doubling is meant in nominal terms (i.e., without discounting for inflation); and, given the miserly budgetary allocations, impossible if meant in real terms.

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