The latest number on retail inflation released last Friday was revealing. The overall number for March saw a pickup in the inflation rate from 2.57% in February to 2.86% in March. This marginal acceleration, interestingly, came about because food inflation turned positive at 0.3%—for the previous five months it had contracted. For the full-year food inflation, one of the metrics of farm distress, averaged 0.1% in 2018-19. According to The Times of India, which quotes the rating agency Crisil, this is the lowest level for food inflation since 1991.
This factoid has once again put the spotlight on the problem of farm distress, especially if one takes into account the fact that growth in rural wages continues to be low, even as sources of non-farm employment have virtually disappeared. While in political rhetoric it is no longer top billing, the food inflation trajectory is a reminder that the issue of farm distress is far from over.
In fact, till December, it was the dominant political theme; something that contributed in stoking the anti-incumbency vote against the Bharatiya Janata Party (BJP) in the elections to the three state assemblies of Madhya Pradesh, Chhattisgarh and Rajasthan. The BJP lost power in all three states. The defeat presumably prompted the BJP-led National Democratic Alliance (NDA) to introduce the Pradhan Mantri Kisan Samman Nidhi Yojana, or PM-Kisan—designed as an income support scheme entailing a pay out of ₹6,000 per year for all farmers with land holdings of less than two hectares. It is expected to cost the exchequer ₹75,000 crore annually. In their manifesto, released a little over a week ago, the BJP has promised to extend this relief to all farmers if the NDA is re-elected.
Strangely enough, since early January as the general election cycle loomed closer, the issue of farm distress began to recede from the political lexicon of the opposition parties. It was not that farm distress had eased, but somehow it had lost currency with politicians. A previous edition of Capital Calculus, in fact dwelled on this piquant phenomenon.
After the NDA made public its mega plan for farmers in the Union budget for 2019-20, the counter-strikes by the Indian Air Force on terrorist hideouts located in Balakot, Pakistan, which gave a boost to the sentiment of nationalism and the election cycle kicking in, farm distress as a political issue is now restricted to pockets in the country. As The Indian Express reported on Sunday, in some parts of the country, farm distress triggered by drought is assuming epic proportions.
However, the larger reason for this malaise is the failure of the farmer to be protected from steep price falls—as captured in the trends in food inflation. The PM-Kisan, for the first time nationally, acknowledges the problem of the need to provide income support to mitigate some of the risks. Telangana had already announced a similar scheme earlier. This risk has arisen because Indian agriculture has undergone a structural makeover with non-food grain crops, such as horticulture, which are extremely susceptible to price risks, now dominating the farm basket.
Yes, while income support is a welcome relief, it is, like in the case of farm loan waivers, not a solution to the structural crisis impacting Indian agriculture. Presumably, our politicians will be willing to walk the talk and initiate the much needed structural reforms—especially with respect to breaking the hegemony of the cartels distorting price formation for agricultural products—once the verdict of the 17th Lok Sabha poll is delivered on 23 May.
If not, India and its farmers are destined to a repeat of this ignominious cycle of destruction.
Anil Padmanabhan is managing editor of Mint and writes every week on the intersection of politics and economics.
Comments are welcome at anil.p@livemint.com
