If indeed the disruptive and failed demonetization exercise — now being dismissed as a temporary setback for the government because of implementational failures, even by sycophants — is a thing of the past, there are very real structural issues plaguing the system that can be ignored only to India’s peril.
There is, however, a message in the government economists’ stout defence of the demonetization even though their arguments were so thoroughly exposed and discredited by the entire experience, particularly in the farm sector. Many minds in these echelons of the policy-making society stay rooted in ignorance; they continue to defend the indefensible and sustain the problems, as are evident in the Indian agriculture space.
The aftermath is that farmers are out on the streets agitating even as programmes of the government that were supposedly designed to double farmer incomes have failed to take off. One is not questioning the intent of the Prime Minister but the futility of the ‘one-shoe-fits-all’ policy for the farm sector. The Pradhan Mantri Fasal Bima Yojna (PMFBY) is a classic case where the best intentions of the policy-makers got muddled in the policy fine-print.
The PMFBY is designed to provide crop insurance where the central government shares part of the premium, subject to conditions. To receive the central government share, the state has to walk the dotted line, come hell or high water; whether the region be rain-fed or irrigated; whether the cropping density be less than 50 per cent or upwards of 200 per cent. Such inbuilt policy rigidities for addressing farm sector turmoil are destined to self destruct.
The e-Nam, the electronic trading platform for ushering in market reforms, similarly, exists only on paper. The central government incentive of `75 lakh for each e-Nam connected mandi has not resulted in any actual transactions. The Karnataka government’s electronic trading platform is more vibrant than that of the e-Nam’s but the centre’s egoistic attitude is bent on stifling it rather than facilitating it to flourish.
Meanwhile legerdemain flourishes. States like Haryana log in all Food Corporation of India (FCI) purchases as e-Nam transactions that enable favour-seeking economists and journalists to sing peans of transformative change. However, no economist citing dubious data can avoid being held accountable in farm sector conversation and such thought leaders often stand exposed and condemned for wilfully fabricating fake news. This is not a little curious because it is clearly possible to make mid-course corrections and get the policies back on track.
A case in point is the manner in which the government accepted the roadblocks generated by the Goods and Service Tax (GST) and undertook a course correction by notifying 288 changes in the original GST in four months. Even so, other major changes are awaited. What forced the issue with the GST was the vocal trade and commerce space while the farm sector is virtually devoid of strong vocal chords. For both these troubled farm sector policies there are simple solutions though, provided the centre is prepared to respect the principles of federalism.
All that is needed is to allow each state to design its own crop insurance scheme and still be entitled to the central government contribution towards premium. Similarly, the e-Nam can work if every state is allowed to have an electronic platform for trading of commodities, with inter-operability with other systems. Technology is an enabling mechanism if policy does not use it as a stifling one. Federalism too is a strengthening concept unless it is broken in spirit.
The obvious worries about the way the Regional Economic Comprehensive Partnership (RCEP) for trade within Asia has been shaping up is another case in point with the issues of different Indian states not being adequately taken on board by the Indian position. The suggestion from knowledgeable quarters that the central government should not negotiate international trade treaties on agriculture commodities without the consent (not just the anaemic consultations engaged in) of state governments was shot down on the plea that the Constitution of India placed trade negotiations under the purview of the central government even though agriculture was in the domain of the state governments. The catastrophic import of this dichotomy has already dawned on affected farmers.
The problem is that states, either innocent of these emergent contradictions or too financially dependent — and thus meek — to challenge these decisions, surrender both their sagacity and their entitlement when the central government concedes unhindered import of agriculture commodities that drastically hits market realizations for Indian farmers. If nothing else, this necessitates a restructuring of the funding ratio in the Rashtriya Krishi Vikas Yojna from 60:40 to 80:20, where central government contribution rises to 80 per cent. This means that it bears the major financial brunt of its policy inadequacies, especially when they trample on farmer incomes.
Additionally, the states should demand that the central government set a floor price for farm produce, where the centre alone will shell out the shortfall between the floor price and the market price and the states will not be penalized for fallout of policy not sanctioned by them. Another way of addressing the imbalance is by devaluation of the rupee but the Reserve Bank of India is obviously huddled in counting the de-notified old currency notes to look beyond its nose.
This is not to say that the states are epitomes of knowledge as far as the farm sector is concerned or that their governance and delivery mechanisms are anything significant to set store by. For a government that preaches digitization, there is need to inject some fillip into its work and even for Parliament to mandate that all inter-government work become paper-less with blockchains created.
There is an equally strong case for a fresh look at the devolution of funds to the states in a federal structure by the 15th Finance Commission and how this affects the farm sector in different states. The abiding woe is that there are no farmer representatives on the Niti Aayog nor were there any in the former National Advisory Council (NAC) of India or anywhere where farm policy is made. Such wanton disregard for understanding farmer issues can only lead to situations where farmers commit suicide by the droves.
The recently concluded ‘World Food Day’ extravaganza of the food processing ministry, reportedly saw investments for more than `100,000 crore signed. The only lasting impression, however, was of the Guinness World Records feet of for cooking 918 kg of khichdi at the event; probably because no intelligent soul was convinced by the propaganda. Healthy though the khichdi is as a basic meal for the Indian masses, what is not so healthy is the khichdi that the government makes; one of the most telling examples being the converging of the food processing ministry with that for agriculture and farmer welfare.
Come 2019, there is no doubt the such policy anomalies will drive the farms into a state of furore that will engulf the establishment. If saving the day or even keeping the long night at bay be the intent of the government, a change in leadership of the farm sector may be in order and the efficient Nitin Gadkari be given charge of this most crucial combination. There should be limits to expectations, by even a charismatic leader, of public support grounded in the farmers’ much belied hopes of ache din.
The Prime Minister could hardly be naive enough to believe in his own successful media outreach. Yet, sometimes, one is beguiled by one’s own sense of greatness and chooses to listen to economists of one’s choice. The problem is when these experts stop listening to the people, the people stop believing them. If the central government continues to perform like Nero playing the fiddle while farmers commit suicide, one fears that the ground under the government’s feet will turn into quicksand.•