The agricultural sector has been neglected when in fact it has the potential to reboot the economy. Arun Jaitley’s focus should therefore be on revitalising agriculture. Budget 2016 provides the opportunity to do this.
We are in a moment when the global economy shows no signs of revival; Russia and Japan are faced with recession, and emerging economies like Brazil and South Africa are in dire straits. There is no silver lining visible as far as domestic industrial growth is concerned. At such a time, all eyes are on Union finance minister Arun Jaitley to see how he plans to sustain economic growth that eventually leads to job-led growth.
Growth without jobs is meaningless. For the past 12 years, despite its rate being high, India’s growth has been largely jobless, with only 15 million jobs created during the 10 years of the UPA regime. With employment per factory declining steeply over the years, the chances for a revival seem difficult. This is indicative from the data published by the Department of Industrial Policy and Promotion (DIPP). Investment proposals received by DIPP for new projects to be set up in 2014-15 showed a possibility of creating a maximum of 4.11 lakh jobs.
Arun Jaitley’s agenda revolves around pushing reforms in order to lift growth and create jobs. But what is not being realised is that agriculture alone – the sector that has been neglected all these years – has the potential to create massive gainful employment, build domestic demand and thereby revitalise the sluggish economy. Whether we like it or not, the only pathway to reboot the economy passes through agriculture.
This assumes importance given the fact that 153 million youth in the age bracket of 15-29 were looking for work in 2015-16. With only a fraction of that number of jobs available, and knowing that new projects in FY ’15 employed only half the number of workers compared to new projects a few years ago, creating ample and suitable employment opportunities remains a Herculean task. Considering that the young people expected to enter the job market by 2020 is likely to swell to 156 million, more of the same therefore is not the answer.
Budget 2016: a chance to break the shackles of the past
The potential of ‘growth economics’ to create jobs has reached saturation. The growing protests, often accompanied by violence – by Jats in Haryana, UP, Delhi, Rajasthan; Patidars in Gujarat; Marathas in Maharashtra; Lingayats in Karnataka – seeking job quotas is clearly indicative of the failure of the trickle-down theory. It also reflects the continuing neglect of agriculture that has turned farming into a loss making enterprise. Farm incomes are now at the lowest level, thereby forcing the huge farm workforce to abandon agriculture in search of menial jobs in the cities.
This trend has to be reversed. There is no other alternative.
As per Census 2011, 52 per cent of the country’s workforce is engaged in agriculture. In other words, the agricultural sector is India’s biggest employer. But over the past few decades, agriculture has been systematically starved of financial resources, and continuing neglect and apathy has turned farming highly uneconomical. The spate of farmer suicides, which has now increased to an average of 52 deaths each day, and reports of farmers selling their blood to make a living in the drought-hit Bundelkhand region, shows the severity of the agrarian crisis, which worsens with each passing year.
Presenting the budget last year, Arun Jaitley had listed increasing farm incomes as the government’s top-most challenge. But somehow, by the time he ended his speech, he seemed to have forgotten about rescuing the farming community from economic distress.
NSSO 2014 had computed the income of an average farm household at about Rs 6,000 per month, of which only Rs 3,000 came from farming. The rest came from non-farm activities, including MNREGA. Studies by the Commission for Agricultural Costs and Prices (CACP) have shown that the net income per hectare from cultivating wheat and rice even in the frontline agricultural state of Punjab is about Rs 3,000 per hectare. If this is the situation in Punjab, the extreme economic distress prevailing in the rest of the country can be imagined.
If Rs 6,000 is the income of a farm household – comprising five members – it is quite natural that the young would swarm into the cities looking for menial jobs. RBI Governor Raghuram Rajan as well as the deputy chairman of Niti Ayog Arvind Panagariya have repeatedly said that the best reform is to move farmers out of agriculture so as to provide a cheaper labour force for the industry. This is based on the economic prescription doled out by the World Bank and pursued by the global financial markets.
Rather, at a time when jobs are scarce and farm incomes are plunging, Arun Jaitley’s focus should be on reviving agriculture instead of creating an army of dehari mazdoor. This will provide gainful employment to those who are already engaged in farming, and in turn will create more domestic demand.
Five thrusts for reviving agriculture and creating employment
Here are five thrust areas that I think need immediate attention:
- After two years of back-to-back drought, and with an unprecedented spurt in farmer suicides in 2015, I expect the government to provide an economic bailout package of Rs 3 lakh crore to the agriculture sector. Remember, a similar economic bailout package of Rs 3 lakh crore was provided to industry after the economic meltdown of 2008-9. An economic bailout package for agriculture would benefit roughly 10 crore farm families.
- Public sector investments in agriculture must be increased to Rs 1 lakh crore for 2016-17. Allocations for agriculture should be enhanced by 25% in every budget to make any meaningful contribution. Not many are aware that the budgetary allocations for MNREGA at present exceed that of agriculture, which employs 52% of the population. In 2014-15, the budget allocation for agriculture was Rs 15,267 crore. A year earlier, in 2013-14, it was 12,006 crore.
- Since the NDA government has, through an affidavit in Supreme Court, made it clear that it has no intention of providing farmers with 50% profit over and above the cost of production, as recommended by the Swaminathan committee, since this will distort markets, the government should announce the setting up of a National Farmers Income Commission, which will work out the minimum assured monthly income package that a farming family must get. The 7th Pay Commission provides a basic monthly salary of Rs 18,000 to a chaprasi whereas the average monthly income for a farm family does not exceed Rs 6,000. This anomaly must be corrected.
- The focus of infrastructure investment must shift to agriculture and rural development. Adequate investment must be made available for building market yards or mandis. If a market yard has to be provided in a radius of 5 kms from a village, India will need 42,000 such mandis. At present, only 7,000 Agriculture Produce Market Committe-regulated mandis exist. Along with the mandis, the emphasis should also be on building a network of rural godowns and rural link roads.
- Rural enterprise too needs encouragement. Start-ups have been given a three-year tax holiday with several other concessions. The same benefits should also be given to farmer producer companies, which continue to pay 30 per cent tax every year. Similar tax concessions should also be given to small and medium entrepreneurs who are linked to Mudra Bank.
Devinder Sharma is a food and trade policy analyst, and an award-winning Indian journalist, writer, thinker and researcher.