At a time when the coronavirus pandemic has not retreated fully, the Chinese are camping at our borders and farmers are wreaking mayhem in the capital, forecasts have been made of doubledigit GDP growth for the coming financial year. A week in politics and economics is a long time but soothsayers are not deterred by caution or common sense. Such rosy forecasts are more than welcome, deflecting attention from the uncertain present, with the intended audience feeling happy, not even bothering to think that should the prophecy of 11.5 per cent growth in FY 2021-22 fortuitously come true, they would still be roughly at the same level at which they were two years ago.
The coronavirus pandemic further damaged our economy, which was already in decline. Demonetisation, guaranteed to flush out black money, was the first major initiative to go awry. Even before the economy could recover from the shock of demonetisation, along came GST, designed to boost trade and commerce. Both initiatives failed to achieve their stated objectives and, in combination, proved ruinous for the economy. Thereafter, we had a complete lockdown for 68 days which did not annihilate coronavirus ~ total cases which were less than 500 at the beginning of the lockdown went up to 2,00,000 by its end ~ but decimated the economy with the GDP falling by 23.9 per cent in the first quarter of financial year 2020-21.
Lack of proper planning and foresight marred these initiatives. The Reserve Bank of India issued 53 notifications and the Government made 21 announcements relating to demonetisation in the fifty odd days after demonetisation. A number of these instructions, modified or overruled earlier instructions. Obviously, the Government did not factor-in venal human behaviour like money mules being employed to exchange old notes, misuse of Jan Dhan accounts and involvement of bank personnel in the improper exchange of old notes. Additionally, enough new notes were not printed in advance, leading to a shortage of currency with the public, that caused great hardship during the demonetisation period.
Similarly, the GST regime has gone through myriad changes in its three and half years of existence, resulting in great confusion for all concerned. A common thread running through all such examples is the Government’s belief that if a proper legal structure is put in place, the desired results would follow automatically. The recently introduced Farming Acts reflect this philosophy. Discussions between the Government and farmers and detailed analyses by experts have revealed that the Government had aimed to increase farmers’ income by having them cultivate non-traditional crops and making them giveup their reliance on chemical fertilisers and pesticides, which would reduce input cost substantially and prove beneficial for the environment.
One of the Farming Acts [Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Service Act, 2020] legalises contract farming, envisioning the coming together of farmers to form Farmer Producer Organisations (FPOs), to bargain with corporates. Implemented sincerely, the three Farming Acts are capable of ushering in an agricultural revolution but no preparation was made for the operationalisation of the Farming Acts prior to their enactment or even till now.
For example, switching over to cultivation of non-traditional crops is not easy. Firstly, the appropriate crops for a particular region have to be identified. Then, the know-how for planting and growing has to be disseminated and finally, a market for such crops has to be created. Similarly, farmers have to be helped in forming FPOs, without which individual farmers would be at the mercy of corporates. No wonder, in absence of the basic framework to implement the Farming Acts, the farmers did not believe the Government’s assurances. Fuelled by the mistrust in the minds of the farmers, the Farming Acts have set up an ugly confrontation between the farmers and the Government.
A large dose of targeted investment is needed to make farming remunerative. Instead of fulfilling its responsibility towards farmers, the Government tried to attract private investment in agriculture through the Farming Acts, which, given the profit orientation of corporates, may or may not materialise. The farmers fear that investment by corporates in agriculture would be exploitative like that of the village moneylender. Additionally, farmers are afraid of the disruptions that a new ecosystem would bring. The precarious financial condition of the farmers makes them wary of being left at the tender mercies of corporates. As farmers see it, they are opposing the new laws to save their livelihoods.
In the recent past, the Government had been less than charitable towards farmers. For example, out of an allocation of Rs.3.34 lakh crore in Budget 2019 for agriculture and allied activities, only Rs 2.35 lakh crore was spent. As part of the fiscal stimulus, the Finance Minister announced a stimulus package of Rs 4.30 lakh crore for farmers, out of which Rs 3.80 lakh crore was in the form of credit and only Rs 50,000 crore was in the form of Government spending. From the sketchy details, available in the public domain, Food Micro Enterprises got Rs 10,000 crore, fisheries got Rs 20,000 crore, animal husbandry infrastructure got Rs 15,000 crore, herbal cultivation got Rs 4,000 crore and bee-keeping and vegetable cultivation got Rs 500 crore each. The precise way in which these allocations are to be spent has not been spelt out so far, even after eight months. Significantly, the cash stimulus of Rs 50,000 crore makes up only half of the last year’s Budgetary shortfall of Rs 99,000 crores.
Till now most of the Government’s largesse has been reserved for commerce and industry. After Budget 2019, the FM announced a reduction in corporate tax rates, providing a relief of Rs 1.40 lakh crore to corporates. Tax rates for Foreign Portfolio Investors were also cut. Amongst other reliefs, the FM released Rs 70,000 crore for Public Sector Banks’ recapitalisation and Rs 30,000 crores to Home Finance Companies, a Rs 20,000 crore fund was created for finishing stalled housing projects and export incentives of Rs 50,000 crore were announced. Around 80 per cent of the stimulus of Rs 25 lakh odd crores announced by the FM from April to November 2020, has gone to MSMEs and corporates.
A matching investment in the agricultural sector would have provided millions of jobs and prosperity to countless farmers. Agriculture, which employs 45 per cent of our population definitely needs a push. The Government can set up agriculturebased industries and improve infrastructure in villages at a fraction of what has been provided to other sectors. Imparting knowledge about modern farming practices, providing adequate capital to farmers, helping farmers in choosing the correct crops to grow and helping them in marketing their produce, can end rural distress permanently.
Despite the step-motherly treatment meted out to it, the agricultural sector was the only sector of the economy that withstood the vagaries of the coronavirus scourge, growing by 3.9 per cent in the first quarter, when all other sectors floundered. Demand for tractors, agricultural implements, fertilisers etc kept the cash registers of many manufacturing concerns ringing. Exports of agricultural commodities rose by 43.4 per cent to Rs 53,626 crore in the first half of this financial year ~ at a time when overall exports declined by about 20 per cent, touching their nadir in the process.Now that the Farming Acts are a reality, the Government should take steps to minimise the social and environmental cost of these Acts. We should take care that we do not end up eliminating farmers like the USA which has only 20 lakh farmers for a population of 33 crore. Again, the Government should ensure that corporates do not practice monoculture with the aid of large doses of chemical fertilisers and pesticides, that degrade farmland and exact a huge cost on the environment. The proposal of the Government to put the Farming Acts on hold for two years is eminently sensible if the Government plans to utilise the interregnum to prepare the ground for implementation of the Farming Acts. Indeed, if sufficient money and sincere efforts are put in by the Government, private investment would not be required to rejuvenate agriculture.
However, what the Anglo- Irish satirist Jonathan Swift said, almost four centuries ago, about farmers and politicians, still holds true: “Whoever could make two ears of corn or two blades of grass grow upon a spot of ground where only one grew before, would deserve better of mankind, and do more essential service to his country than the whole race of politicians put together.” (Gulliver’s Travels: A Voyage to Brobdingnag)