An Agriculture-led Revival as Flawed Claim

Context: Basing the revival of the economy on Agriculture is a false claim since the rural economy is under dire straits under the veil of healthy indicators. 

Arguments in favour of Agriculture being a leader in India’s economic revival

• The resilience of Agriculture amid pandemic: is seen through Increased food grain production- 

• Foodgrain production in 2019-20 was 3.7% higher than in 2018-19. 
• Procurement of rabi wheat in 2020-21 was 12.6% higher than in 2019-20. 

• Higher food inflation: due to sustained demand for food signifying a shift in terms of trade in agriculture.

• Food inflation in the Q1 of 2020-21, at 9.2%, was higher than in the previous year

• The higher area under Kharif sowing:

• In 2020-21, it was 14% higher than in 2019-20.
• This was accompanied by higher tractor and fertilizer sales, which bodes well for economic recovery. 

• Positioning of agriculture as the engine of revival: As part of the ?20-lakh crore Atmanirbhar Bharat package

Issues with the agriculture and rural economy

• Low market arrival: While the rabi procurement increased due to efforts by states during the pandemic to ensure food security, this did not translate into the arrival of crops in the market.

• Market arrivals of as many as 15 crops were lower in 2020 than in 2019. 

• Low farm incomes: Only 13.5% of paddy farmers and 16.2% of wheat farmers were able to get an assured Minimum Support Price (MSP). The rest sell their output to private traders at lower prices.

• Impact of lockdown: Loss of market due to disruptions in supply chains, closure of mandis and a fall in consumer demand.

• For, E.g. There were major losses in the milk, meat and poultry sectors; industry associations estimate the total loss for the poultry industry at ?50,000 crores.

• Misplaced higher inflation: Higher rural inflation benefited farmers, and that it was due to higher food demand are misplaced. This is due to the following facts:

• In?ation rates not representative of farmer’s prices: since the inflation is largely due to the supply chain disruption; 
• Prices of most crops declined. 

• For, E.g. average paddy prices were about ?1,730 per quintal on March 23, but ?1,691 per quintal on June 30. 
• Average wheat prices were ?2,045 per quintal on April 1, but ?1,865 per quintal on June 30. 

• Distress on Small and marginal farmers: as they have become net buyers of food instead of net sellers, and hence were forced to pay more for food purchases.

• Higher Kharif sowing as an indicator of distress, not prosperity: Increase in the area under Kharif crop has been due to the following factors:

• Rise in the number of farmers: 

• Number of persons employed as “farmers” in June and July 2019 was 11.2 crore and 11.4 crores, respectively.
• But in June and July 2020, these numbers rose to 13 crores and 12.6 crores, respectively.

• Fall in income, ensuring food security and return of the migrants have also increased the sowing. 
• Rising unemployment: has forced people into agriculture-

• Rural unemployment rates rose sharply in 2020, to 22.8% (April), 21.1% (May) and 9.5% ( June).

• Issues with the fiscal stimulus: 

• Inadequate spending: Total fresh spending for agriculture in Atmanirbhar Bharat package was a trickle: less than ?5,000 crore. 

Way Forward: A fiscal stimulus must include the following: 

• Doubling of payments to farmers: from the current ?6,000 a year to ?12,000 a year under PM-KISAN, instead of frontloading the instalments.

• Set all MSPs at 150% of the C2 cost (comprehensive cost) of production: instead of raising the minimum support price (MSP) for Kharif paddy by ?53 per quintal -which is the lowest rise in a decade.

• Loan Waiver: Instead of a moratorium, the government should have waived the interest on loans taken by farmers in 2019 and 2020.  

• Package of direct assistance: instead of vague loan based schemes in animal husbandry and livestock and dairy production.

Conclusion: 

• Rural incomes will remain depressed, and push the economy further into a vicious cycle of poor demand, low prices and low growth.
• The government should discard its role as a passive observer and decisively intervene in rural India with a substantial fiscal stimulus at the earliest.