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Modi Govt 2.0 | COVID-19 has prompted long-pending agricultural reforms

Based on its performance this last year, the second year of the Modi 2.0 government promises to bring far reaching changes to the agricultural economy

May 29, 2020 / 11:11 AM IST
Representative Image

Representative Image

Siraj Hussain

Who is responsible for agricultural growth? Centre or the states? This is one of the recurring themes in debates on agriculture in India. Even before the Centre became all powerful, due to COVID-19 and started exercising powers under the Disaster Management Act, 2005, the Centre was driving agricultural policies as most subsidies are funded by it. Similarly, the price and trade policies of agricultural produce are decided by the Centre.

In post-Covid-19 India, the Finance Minister has announced a new law to regulate agricultural trade, modifications in the Essential Commodities Act and a new regime to govern contract farming. Removal of restrictions on agri-trade will bring benefits to farmers in the form of more choice of buyers and, therefore, higher prices. It will also bring much-needed private investment in the supply chain. This may be one of the few positive outcomes during the COVID-19 calamity.

However, the performance of the agriculture sector in the first year of the Modi 2.0 government presents a mixed bag.

The share of agriculture, forestry and fishing in India’s Gross Value Added was just 16.1 percent in 2018-19 — this when these sectors provide 44 percent of employment. The number of people dependent on agriculture and allied sectors will only go up in FY 2021 due to job losses in the informal sector of the economy. This may drive down rural wages in eastern states and lead to more mechanisation in relatively better off states, which depended on migrant labour for agricultural and allied activities.

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In the last four years, doubling of farmers’ income has been the main theme for the sector. The Committee on Doubling of Farmers’ Income estimated that the monthly income of an average agricultural household in 2015-16 was Rs 8,059. The target was to double it to Rs 16,118 by 2022-23 in real terms (after discounting for inflation). This required nominal growth rate of about 23 percent per annum in the three years from 2019-20 to 2022-23.

While it was a tall order, it was perhaps easier to achieve in the states having a low base of average income of agricultural households (e.g. Bihar at Rs 3,776/month) than in the richer states (e.g. Punjab at Rs 19,242/month).

An assistance of Rs 6,000 a year, under Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) adds 13.25 percent to the average income of an agri-household in Bihar. His income could have been boosted if he could realise the MSP for at least wheat and paddy, crops which are procured in several other states. However, since nothing has changed on the ground, farmers are forced to sell even wheat and paddy at less than the MSP.

Rabi maize in Bihar is selling at about 30 percent lower price than the MSP and various components of Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) have not made any difference to farmers in getting remunerative prices. COVID-19 has only aggravated the situation, and there are reports of distress sale of grains, fruits, vegetables, milk and poultry.

So, it seems that we are going to miss, by a wide margin, the target of doubling farm income by 2023.

A success story of the first year of Modi 2.0 was PM-Kisan. In the very first Cabinet meeting, it was decided to expand PM-Kisan to non-small and marginal farmers. So far, about 87 million landholders have received PM-Kisan instalments.

modi_2.0However, the expansion of PM-Kisan to non-small and marginal farmers benefited many undeserving land holders also. According to Nabard’s All India Rural Financial Inclusion Survey' (NAFIS), the average income of agri-households in Punjab owning more than 2 hectares was Rs 50,000 per month. In addition, there are farmers who are able to realise a remunerative price for wheat and paddy (MSP) and sugarcane (fair and remunerative price), crops largely grown in irrigated areas. A higher amount of assistance under PM-Kisan to farmers in rain-fed areas, who are not able to sell their crops at MSP, was a more desirable intervention.

An innovative pension scheme for farmers, PM Kisan Maan Dhan Yojana was also launched from June. However, up to February only 1.98 million farmers (age 18-40 years) have agreed to contribute a small monthly amount of Rs 55 to Rs 200 to make them eligible for a monthly pension of Rs 3,000 when they attain the age of 60 years. The inability to afford even this amount shows the extent of impoverishment of farmers in large parts of India.

Some good decisions of far reaching implications were taken for animal husbandry, dairy and fisheries sectors.

The Centre has decided to bear the entire expenditure for eradicating foot and mouth disease and brucellosis by vaccinating 530 million livestock till 2024. Vaccination would have been badly hit by the lockdown. If it is quickly resumed, the yield of milk will increase and the export of buffalo meat to the European Union, China and the United States may resume.

The fisheries sector grew by 7.5 percent in the last five years. The export of marine products earned $6.73 billion in 2018-19. On May 20, the government approved a scheme which may see an investment of Rs 20,050 crore over the next five years. India’s export earnings from the fisheries sector can double if the targeted investment can materialise.

So, the second year of the Modi 2.0 government promises to bring far reaching changes to the agricultural economy. If the economic growth returns to about 7 percent in 2021-22, agriculture and allied sectors may also see much larger private investment flowing into the sector.

Siraj Hussain retired as Union Agriculture Secretary, and is currently Visiting Senior Fellow, ICRIER. Views are personal.
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Siraj Hussain , a former Union agriculture secretary, is visiting senior fellow, ICRIER, New Delhi.
first published: May 29, 2020 11:11 am