Farmers at work in Madhya Pradesh during India's monsoon season. Photo: Wikimedia Commons / Flickr / Rajarshi MIitra
Farmers at work in Madhya Pradesh during India's monsoon season. Photo: Wikimedia Commons / Flickr / Rajarshi MIitra

The recent assembly elections in Gujarat and Himachal Pradesh saw the Bharatiya Janata Party win comfortable majorities in both states. It wrested HP from the Indian National Congress (INC) and retained Gujarat for an unprecedented sixth term. The BJP now rules 19 of India’s 29 states and Union Territories, either on its own or in partnership with regional parties.

However, the INC did unexpectedly well in Gujarat. The BJP won 99 seats in the 182-member assembly, down from 115 in the previous assembly and way below the BJP’s proclamations that it would win 150 seats. The Congress won 77 seats, improving on its previous tally of 59.

Since Gujarat is Prime Minister Narendra Modi’s home state (he was a three-time chief minister there), he pulled out all the stops in a no-holds-barred campaign, insinuating among other things that the former prime minister, Dr Manmohan Singh, was colluding with Pakistan.

The newly anointed INC president, Rahul Gandhi, also campaigned extensively across Gujarat. The INC allied with three young Gujaratis who are leaders of specific castes. Two of them, Alpesh Thakor and Jignesh Mewani, made their electoral debuts in this poll, and both won. The third, Hardik Patel, is only 24 – a year short of the minimum age required to stand for elections in India.

The Gujarat results will be sliced and diced in many ways by political analysts. One of the most illuminating is to examine it in terms of a rural-urban divide. There are four large urban conglomerations in the state: Ahmedabad, Surat, Vadodara and Rajkot. The BJP won 46  of the 55 seats in those four clusters. But the INC won 72 of the 127 seats in rural and semi-urban areas.

This is one of the many indications of broad-based rural distress and dissatisfaction with the current regime in New Delhi. Hardik Patel, for example, has achieved prominence in the past two years as spokesman for the Patidar agitation. The Patidars are high-caste landowners and farmers who are demanding reservation quotas in government jobs.

The Gujarat results will be sliced and diced in many ways by political analysts. One of the most illuminating is to examine it in terms of a rural-urban divide

There have been similar, violent agitations by Jats, another large farming and landowning community in the northern state of Haryana. The western state of Maharashtra has also seen high-caste Marathas, the predominant landowning caste, agitating for reservations. Maharashtra, in addition, has become notorious over the years for a large number of suicides by indebted farmers.

The rural distress is directly related to poor agricultural performances over the past three years. The monsoon was sub-par in 2015 and 2016 and demonetization affected winter crops by depriving farmers of cash at the time of planting.

Agriculture suffered from price deflation early this year, with farmers just dumping produce for lack of buyers. The past two quarters have also seen poor growth. Agriculture grew by only 2.1% in Q1 (April-June 2017) and growth dipped to 1.7% in Q2 (July-September). The acreage planted this winter is lower than last year – something that the Reserve Bank of India noted with concern in its latest monetary-policy review.

Apart from demonetization, the distress has been accentuated by other government policies. The BJP has consistently followed a policy of keeping the minimum support price low. The MSP is the mandated minimum paid for a whole range of agricultural commodities. A low MSP benefits wholesale traders and urban consumers of food, at the expense of the farmer.

The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) is a minimum wage paid to unemployed rural labor, designed as a palliative for rural distress. The BJP has ruthlessly weeded out “fake” MNREGA registrations. More than 31 million registrations have been canceled as likely fakes, and MNREGA recipients also allege long wage freezes and delays in payments, in defiance of court orders.

It’s likely that the MNREGA, which already has allocations of around 480 billion rupees (US$7.5 billion), will see expanded budgets and sprucing up.

The BJP’s strategists are now looking at policy shifts designed to mollify the vast constituency of rural voters. The BJP-ruled states of Uttar Pradesh and Maharashtra have already announced massive farm-loan waivers amounting to the forgiveness of more than 660 billion rupees.

Finance Minister Arun Jaitley gave a sympathetic hearing recently to the Consortium of Indian Farmers Associations, which presented a list of budget demands. The demands included repeal of the Essential Commodities Act, which allows the government to freeze the movement and stock-holding of farm products and to change import duties and/or ban exports arbitrarily. Another suggestion was to link domestic prices with customs tariffs.

Next year, there are key assembly elections in the BJP-ruled states of Rajasthan, Madhya Pradesh and Chhattisgarh, as well as the Congress-ruled state of Karnataka. Rajasthan, MP and Chhattisgarh are more agrarian and economically underdeveloped than Gujarat or Maharashtra. Promises of more farm-loan waivers and higher allocations toward MNREGA are likely to be part of the campaign platform.

Higher MSP is a more ticklish subject. This would directly benefit fewer than 20% of farmers while it would alienate commodity traders (who are generally seen as BJP supporters), and might set off an inflationary spiral.

The repeal of the Essential Commodities Act, if it happens, and of archaic institutions such as the Agriculture Produce Marketing Committee would allow farmers to get better prices for their produce. At the same time, policymakers have to push harder for the creation of basic infrastructure – rural areas are under served in terms of decent roads, good telecom networks, reliable power systems, and banks. Smarter water usage and better irrigation practices would also make a difference.

However, even the most energetic measures would take time to make an impact, given the sheer scale of the problem. In the broadest possible terms, agriculture contributes only about 18% of gross domestic product, but it is the major source of income for more than 50% of the population.

As it stands, median per capita farm incomes of 1,600 rupees a month are way below the mean national per capita of 10,700 rupees month. The National Sample Survey Office estimates that two out of three farm households find it hard to meet normal expenses. This disparity has already fueled a massive migration into cities by rural laborers seeking more remunerative employment.

A discussion paper by NITI Aayog, a government policy think-tank, estimated (based on 2012 data) that 64% of the rural workforce was deployed in agriculture but agriculture only produced 39% of total rural GDP. As many as 84 million agricultural workers needed to find employment in other sectors to reduce this disparity between employment share and output.

That’s a very high asking rate, to use a cricket metaphor.

Devangshu Datta

Devangshu Datta is a journalist and columnist. He writes about investment, economics, science and technology and the intersections between them.

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