Modinomics Is Succeeding At Effecting Real Change In Rural India

On 5 July 2018, the Narendra Modi-led dispensation not only came good on its electoral promise made in 2014, but also decided to reward farmers with a bonanza by virtue of a minimum support price (MSP) hike at 1.5 times over the cost of production. Farmers of paddy and 14 other kharif crops have been the biggest beneficiaries of this move, with the MSP on paddy up by Rs 200 per quintal or 13 per cent over the last year, whereas the MSP for jowar, bajra, and ragi are up by a solid 30 per cent over the last year.

The “A2+FL” formula for raising MSP takes into account actual cost plus imputed value of family labour in the production of a crop. The more ambitious “A2+FL+C2” formula factors in other costs, including imputed rent on land and interest on capital deployed.

The A2+FL formula will cost the government anywhere between Rs 80,000-100,000 crore annually, by even conservative estimates, and is a great start. Critics of the Modi government who claim that the A2+FL formula is inadequate and that the government should have adopted the A2+FL+C2 formula need to understand that C2 would have added unduly to inflationary pressures. Also, unreasonably high inflation would adversely impact the farming class because the farmer is also a consumer, in the final analysis.

More importantly, abnormally high domestic farm product prices could also disincentivise the level of overall farm exports from the current $30 billion-odd, to $100 billion, which the government seeks to achieve over the next few years. Hence, the Modi government's decision to limit MSP hike to A2+FL is economically prudent as it will limit the rise in retail inflation on this count, to barely 10-30 basis points, which is par for the course.

It is true that hiking MSP alone is not enough. An effective procurement mechanism is necessary to ensure that farmers don’t end up selling their produce at a price that is lower than the MSP. In a study relating to wholesale paddy prices between April 2016 and February 2018, the Commission for Agricultural Costs and Prices (CACP) found that in Uttar Pradesh and Assam, which contribute to 17 per cent of the overall paddy production in India, prices were below MSP during “peak market arrival period of October to December 2017”.

On the contrary, prices in Punjab and Haryana were above the MSP, with Punjab contributing to more than one-fourth of the rice to the central pool. Punjab is a semi-arid region, but by mining groundwater indiscriminately, it is the third-largest rice-producing state in India. Most of the rice produced in Punjab is sold and not consumed internally. Farmers in Punjab use 4,118 litres of water to produce 1 kg of rice, versus 2,432 litres used in Assam. However, paddy farmers in Punjab, who are relatively less productive in terms of water usage, are better off than their peers in Assam due to a more robust procurement mechanism in Punjab, with the central government procuring more than 70 per cent of what is produced.

To cut a long story short, crop diversification and land usage that is in sync with climatic patterns and rainfall in a given region are the best way to ensure that farmers become self-reliant and do not depend solely on the MSP as an incentive. This will also lower the burden on the government exchequer. It is precisely with this purpose of ensuring higher fiscal rectitude and to do away with procurement-related inequalities that have existed across India's diverse states for decades – thanks to a negligent agriculture outlook by the erstwhile Congress-led United Progressive Alliance (UPA) dispensation – that the Modi government, committed to doubling the income of farmers by 2022, has undertaken a plethora of measures.

The government has, for instance, organised more than 2.21 lakh demonstrations in farms through its Krishi Vigyan Kendras (KVKs) to impart training to farmers so they can use modern technology to increase pulses and oilseeds’ yield. Besides KVKs, the ‘Mera Gaon, Mera Gaurav’ scheme, started in 2015-16 to enhance the ‘scientist-farmer’ interface via modern farming techniques, is now spread across more than 13,500 villages and is growing rapidly. Also, 52 new technologies, including soil testing and organic farming packages, have been developed for agricultural advancement by the central government.

The Electronic National Agriculture Market, or eNAM, a key initiative of the Modi government to improve farm incomes, is on course to connect 585 mandis with more than 17 states having already fully or partially amended their agricultural marketing acts to allow for electronic trading.

Till date, over 160,229 farmers, more than 47,000 traders, and over 26,000 commission agents have been registered in 250-plus mandis across more than a dozen states that have joined eNAM. Currently, 69 commodities are traded on the platform. The MSP, in decades of Congress rule, was a sham. Middlemen pilfered away the benefits, leaving hapless farmers with nothing. The direct benefit transfer scheme, along with Jan Dhan, has empowered rural India and there have been savings of more than Rs 60,000 crore in subsidy leakages so far.

What’s notable, India is home to 17 per cent of the world’s population and 11.3 per cent of the livestock count, but it has just 4 per cent of the world’s water resources.

Speaking of water, there is the Pradhan Mantri Krishi Sinchai Yojana (PMKSY), kick-started in 2015 with an allocation of Rs 50,000 crore, to be spent over five years, to develop an irrigation supply chain, water resources, distribution network, and farm-level application solutions to achieve the target of water for every farm and the idea of ‘Per Drop, More Crop’.

After all these years, only 48 per cent of cultivable land is irrigated. Vagaries of nature apart, drought and farmer suicides have happened over the years due to poor water management. PMKSY aims not only to create irrigation resources, but also build protected irrigation by harnessing rainwater at the micro level through ‘Jal Sanchay’ and ‘Jal Sinchan’.

In 2016-17, more than 56,226 water-harvesting structures, over 1.14 lakh hectares of irrigation capacity, and 675 district irrigation schemes were consummated. During 2014-17, 18.38 lakh hectare area has been brought under micro-irrigation, which is the highest so far, with 8.39 lakh hectares brought under micro-irrigation, in 2016-17 alone.

The PMKSY scheme is being implemented on a war footing with the help of Command Area Development, to complete 99 major and medium irrigation projects covering 76.03 lakh hectares in a phased manner till December 2019. This is a game-changer for India’s rural economy.

In addition, there is the Jal Yukt Shivar (JYS), the flagship programme of the Devendra Fadnavis government which is essentially a micro-irrigation project to rejuvenate depleting water bodies. Started in 2015 by Fadnavis, to empower 25,000 villages in Maharashtra by making them water-reliant, the JYS scheme today covers more than 16,621 villages in over 34 districts, with 11,247 villages becoming drought-free.

Additionally, completion of desilting across 2,900 dams in Maharashtra and building of 1.26 lakh wells and over 76,106 ponds and counting have greatly improved the lives and incomes of farmers, especially those from the Vidarbha, Marathwada, and Konkan regions. Creation of water storage capacity in excess of 92 thousand million cubic feet, which has the ability to irrigate almost 24 lakh hectares, has changed farming in Maharashtra.

Modinomics, essentially, is about better roads, expressways, sanitation, creating world-class entrepreneurs, a liberal foreign direct investment regime, a robust services sector, and effective tax compliance system with no room for benami and ill-gotten wealth. But, most importantly, Modinomics is about empowering the farmers who till our soil, so that “jai jawaan, jai kisan” goes beyond a clarion call, to become a workable farm ethic that changes rural India, for the better.