Why subsidy for farm sector is no dole
Devinder Sharma
Food & Agriculture Specialist
“I have calculated all my inputs and my overall costs. At the end of the day, I am not getting the returns. If I started making a balance sheet, I would be in the negative every year,” rues Ammar Zaidi from Hardoi district in Uttar Pradesh. A former banker, he is now into sugarcane cultivation. Quoted in a news report, what Zaidi says is all-pervasive among the farming community.
Corporate bad loans totalling Rs 10 lakh crore have been written off by banks in the last five years. This is just one illustration to show the bias in economic thinking, considering that both the corporate and the farmer take loans from the same bank
Simply put, farmers are victims of a global economic design that has deliberately kept agriculture impoverished. Already at the bottom of the pyramid, markets have failed to prop up farm incomes
In Punjab, the food bowl of the country, too, agriculture is in severe distress. Despite achieving record crop productivity in wheat and paddy — more than 11 tonnes per hectare per year — farmers carry an outstanding debt of Rs 1 trillion, pushing them deeper into crisis. With Rs 2 lakh of debt standing against every agricultural household, it only shows what was always known — farm returns are not enough to cover even the cost of production.
Whether it is in India, the European Union or America, agriculture continues to be in the grip of a terrible crisis. Summing up the tragedy that is affecting farmers globally, a British farmer was quoted as saying: “Every genuine farmer is now stuck unfairly on a treadmill with accumulating debts to meet unless he goes bankrupt, commits suicide or finds another source of income.” Still, every time farmers demand a higher price, it is drowned in the cacophony raised by market apologists, who accuse them of inefficiency, and for living perpetually on government doles.
In reality, we have socialism for corporates, and capitalism for farmers. In a study on the first 10 years of the WTO Agreement on Agriculture, presented at the time of the 2005 WTO Ministerial Conference at Hong Kong, my assessment was that of the massive subsidies that the rich countries provide in the name of agriculture, 80 per cent go to agri-business companies.
Simply put, farmers are victims of a global economic design that has deliberately kept agriculture impoverished. Already at the bottom of the pyramid, markets have failed to prop up farm incomes. If the markets were so efficient, I see no reason why 40 per cent of the income of an American farmer and 50 per cent of the European farmer should come from subsidy support. Call it welfare economics, but the fact remains that there is little alternative to cover up for the losses.
The richest 10 per cent globally own more wealth than the bottom 76 per cent, says the Global Inequality Report. In India, the richest 10 per cent possess 77 per cent of the country’s wealth. While the poorest half in India sees only 1 per cent rise in their wealth, globally the have-nots hold just 2 per cent of the total wealth. In other words, it is quite apparent that economic growth is no measure of social welfare. The widening inequality that has been built up by a capitalist economy is bringing the focus back to the role of a welfare state.
Nowhere else is it as starkly visible as in agriculture. US President Joe Biden succinctly summed it thus: “Fifty years ago, ranchers got 60 cents of every dollar families spent on beef. Today, they get about 39 cents. Fifty years ago, hog farmers got 48 to 50 cents for each dollar the consumer spent. Today, it is about 19 cents. And the big companies are making massive profits.” Earlier, the Chief Economist of the US Department of Agriculture (USDA) had acknowledged that farm incomes in America have been on a steep decline since the 1960s. This is happening in a country where markets dominate, and where corporate profits have swelled up to $2.11 trillion in the last quarter of this year. To help the miniscule population remaining in farming, the US has to come up with massive subsidies and investments every five years.
In India, it’s no different. Studies have shown that farm incomes have touched a 15-year low. Niti Aayog had earlier worked out the real farm incomes in the five-year period between 2011-12 and 2015-16 to be less than half a per cent every year, 0.44 per cent to be exact. In 2016, the Economy Survey itself had reported that the average farm income in 17 states of India, which means farm income in roughly half the country, stood at a meagre Rs 20,000 per year. This comes to an average of less than Rs 1,700 per month. On the other hand, the latest Situational Assessment Survey for Rural Households in 2021 computes the average income of a farm household in the country at a low of Rs 10,218 per month, based on the data collected in 2018-19. But the income from farming operations alone (excluding non-farm activities) comes to a paltry Rs 27 per day. With such pathetically low income levels, over the decades, the resulting farm crisis has led to suicides and forced farmers to abandon farming and migrate to cities looking for menial jobs.
Any call for raising the prices for farmers is always met with stiff opposition from marketeers. A dominant class of economists has often blamed farmers for not linking with markets, because markets value efficiency and provide economic justice. But even in the rich countries, what is not being explained is why the markets have failed to help farmers gain economic independence.
In such a dismal scenario, it is difficult to imagine how the farming communities survive. After all, Indian farmers are, in reality, wealth creators — the gross value of food produced in India being a staggering $400,722,025 (FAO, 2021). Moreover, with a record harvest year after year, farmers have continued to produce more despite not being paid a living income. A record production of 315.72 million tonnes of foodgrains, 342 million tonnes of fruits and vegetables, 210 million tonnes of milk, and with an equally high production in agricultural commodities like sugarcane, oilseeds, jute, etc, in 2022 — farmers produce economic wealth for the country, but remain deprived of being adequately compensated.
Where markets fail, social responsibility can and must fill the void. In order to keep food inflation under control, successive governments have denied farmers their rightful income. The entire burden of keeping food prices low, therefore, has been very conveniently passed on to farmers. Providing farmers with direct income support, beginning with Rs 6,000 a year, given in three instalments, is a welfare measure to fill for the price loss farmers suffer. Strangely, this is considered to be yet another dole for farmers, and a lot of questions are asked about the rise in fiscal deficit as a result. But I hope that in the years to come, the Pradhan Mantri Kisan Samman Nidhi can provide support of at least Rs 5,000 per month to every farmer, including tenant farmers.
When a corporate tax concession of Rs 1.45 lakh crore is announced, like in September 2019, and that too when some economists were asking for support on the demand side, it is hailed as a supply-side reform needed to boost economic growth. Similarly, all kinds of questions are raised when farm loans of Rs 2.52 lakh crores are waived off by a few state governments. While the farm loan waivers are seen as leading to credit indiscipline and a moral hazard, a corporate loan waiver is viewed as leading to economic growth.
Corporate bad loans totalling Rs 10 lakh crore have been written off by banks in the last five years. This is just one illustration to show the bias in economic thinking, considering that both the corporate and the farmer take loans from the same bank.
Economists like Nobel laureate Joseph Stiglitz have already written the obituary for neoliberal economics. With some latest initiatives by the US President being considered as a step back from the policies enshrined under the Washington Consensus, the world is increasingly sliding back to welfare economics. Since agriculture, not only in America, but globally, has suffered from the policies that link it with markets, it is time to ensure that income parity or what we, in India, call a guaranteed price for farmers is enforced. That, I think, will be the best way towards farmer welfare.
When prices for all industrial products come with a price tag, there is no reason why prices of agricultural commodities should not come with a price tag. A legally guaranteed Minimum Support Price (MSP) is the best mechanism to provide a price tag for every agricultural commodity. In my understanding, providing a legally-binding MSP for agriculture produce is what farmers need. While agriculture needs reform, the best way to pull farmers out of the prevailing distress is by providing them with an economically viable and profitable price. Like everyone else, farmers too need a living income that can inspire the younger generation to return to farming as a career.
What the world, in fact, needs is to bring in capitalism for corporates and socialism for farmers.
