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Good News Bad News

Indian agriculture is heading for a record year, the rain gods have smiled upon India this year. But caste protests reveal the crisis within

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After playing truant for two successive years in 2014 and 2015, the rain gods have smiled upon India this year. Though the monsoon has not been as bountiful as originally predicted, it has been good enough to generate smiles all around. All available reports indicate that the kharif harvest will be a record 135 million tonnes. It seems this is likely to be accompanied by a spectacular 57 per cent jump in the pulses output. This should augur well for consumers as well the government as extremely high prices of pulses had led to enormous disquiet with political fallouts.

According to estimates by economists in the agriculture ministry, the kharif foodgrains output is expected to be at least 9 per cent higher compared to last year. Further, a report by Merrill Lynch and Bank of America suggests that farm incomes in India will grow by more than 12 per cent in 2016-17. A good monsoon has also meant that reservoirs have been recharged raising hopes of an unprecedented rabi output as well. In all, total foodgrains output in 2016-17 is expected to cross 280 million tonnes. The good news does not end here. The horticulture sector comprising fruits and vegetables is expected to see output cross 300 million tonnes this year. Moreover, economists predict a record year for poultry and dairy sectors as well. Every which way you look, Indian agriculture is headed for its best year yet.

The farm sector’s performance is set to positively impact the economy at multiple levels. First up, economists see agriculture lifting the GDP growth rate by 0.5 per cent to 1 per cent this year. In the past two years, agriculture did not contribute much to GDP as a result of weak monsoon and modest farm sector output. That could well change this year, with GDP growth rate crossing 8 per cent, making India the fastest growing major economy in the world.

The other major impact would be on the inflation front. Even diehard supporters of the Narendra Modi government have of late been worrying about the political fallout of rising inflation, particularly of food items. In recent months, food inflation has repeatedly breached double digit levels. Consumers don’t care much about statistics. But they do get worried and angry when they have to stretch their budgets to pay for basic food items such as milk, pulses, and vegetables. In fact, when prices of pulses breached Rs 200 recently, it caused much embarrassment to the Modi regime. But it is now more or less certain that food inflation will ease in the coming months.

If the inflation rate decelerates as per expectations, Reserve Bank of India’s new governor Urijit Patel might be tempted to ease interest rates beyond the 25 bps cut in the repo rate on 4 October. This will augur well for smaller Indian companies and entrepreneurs who do not have access to relatively cheaper global capital. The SME sector is the one that will drive the badly needed employment generation. Even large companies ranging from HUL to Hero Motors are now confident of big numbers growth from rural markets that have remained flat or depressed for years now. This can already be seen in the high growth rates registered in tractor and motorcycle sales. Consumer durable and FMCG companies too are expecting a bumper year ahead in terms of sales and revenue.

Amidst all this good news on the farm front comes disquieting news from traditionally farming and peasant communities. The state government in Maharashtra seems to have been caught completely unaware and blindsided by the massive protests by the dominant Maratha community in the state. The Maratha community has dominated both politics and the lucrative cooperatives ever since Maharashtra became a separate state in 1960. They are not the only peasant community in India to be up in arms. In neighbouring state Gujarat that also became a separate state in 1960, the Patel or Patidar community has been giving sleepless nights to both the state government and the BJP since 2015. In faraway north, the powerful Jat community in Haryana organised massive protests that led to widespread violence. Less talked about has been similar protests by traditional peasant communities in Andhra Pradesh. All of them want reservations in government jobs and educational institutions. Scholars like Chandra Bhan Prasad say that these hitherto powerful communities are alarmed because they are losing political and economic monopoly that they have enjoyed for centuries.

The real trouble lies in agriculture, though. The sector now contributes just about 15 per cent to GDP but close to 50 per cent of India depends on it for a livelihood. The hitherto dominant castes want to move out of farming and are better educated than their forefathers. But manufacturing sector employment has simply not kept pace. This is one dilemma and looming crisis that will be the biggest challenge for the Modi government.

sutanu@businessworld.in


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agriculture economy farmers Magazine 31 October 2016