A FARMERS BUDGET! - REALLY?

I am no economist and do not claim to be one(being a doctor by profession). These are some of my views on the budget as I understand it from various newspaper articles and magazines especially the Frontline.
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This budget is dubbed as a populist one targeting the common man especially those in the agricultural sector. The loan waiver announced by the Finance Minister Chidambaram is viewed by many(especially in the print media) as one that will bring a huge relief to the debt ridden farmers

However there are two clauses to the loan waiver: one is that only farmers who have borrowed from the banks could avail of the loan waiver and the other is that only farmers who have a land holding of two hectares or less could avail the loan waiver. So essentially the relief is going to reach only 25% of the farmers. It is especially not going to give relief to farmers from the suicide prone Vidharba district as most of the farmers there own more than two hectares though they are the most hit by the drought and the agrarian crisis. (This paradox is because most of these farmers have arid lands with little access to irrigation and hence the produce from each land is limited and meagre. Therefore inspite of having more than two hectares their agriculture produce is pretty less when compared to farmers who have access to irrigation and who can make a huge produce with one or two hectares.

Most of these farmers have also acquired loans from private moneylenders who charge exorbitant interest rates which have added to the farmers misery. Hence the debt relief package will not reach farmers such as those in Vidharba who are the ones in a quagmire.

Also it is touted that the debt relief package will cost the exchequer. This is not true as the banks have to write off the loans and receive bonds from the government in return and receive a steady interest rate which will cost the government only 4000 crores.

The government should have instead settled the loans borrowed from private money lenders by providing loans through co-operative banks in this regard. This proposal was mooted but was not taken up by the government.

The farmer’s predicament is truly miserable. Imagine that you have a part-time job with a company. Instead of the steady salary you receive every month the company decides to hold up your salary every time it goes through a bad patch even tough you work regularly. This comparison may sound dubious but this is somewhat the state of the Indian farmer. This is where insurance schemes can help the farmer but the government has failed to implement it properly.

The cost of input for agriculture has increased because of subsidies for fertilizers have largely decreased over the past decade. Add to this the compounding problem of drought and the increasing price of seeds.

The farmers borrows from a private moneylender and invests into his land. If a drought season comes he is left with little or no output and no money left to pay his loans which drives him to penury and suicide. Even if the rains come on time and the farmers produces a bounty of harvest he is given a minimum procurement price by the government. Though the cost of input has increased exponentially over the past few years the government keeps the support price of procurement to a minimum level. The prices are kept low so that the prices of foodgrains do not increase and contribute to further inflation. The farmers have been made the scapegoats and shock absorbers here. And the government proudly proclaims that that most of its policies are pro-poor and pro-agrarian.

Have we strangulated our farmers in our quest for liberalization? Liberalisation brought with it the upward moblility of the middle class and an increased access to consumer goods and durables such as computers and mobile phones. India was touted as the perfect destination for MNCs by the government and sops and subsidies were extended several IT companies to set shop here. However with the era of liberalization the farmer has been marginalized more and more and pushed to the background. Farmers income have declined over the past decade thanks to the policies of the government.

Many people say that Nehru made a big mistake by pursuing socialist policies in the post independence era. However they do not realize that it was his socialist policies which gave a firm support base for the economic growth of the country. If we had followed capitalist policy we would have ended up like one of the present African countries.

It is shameful that India has four billionaires in the Forbes list while simultaneously having a human development Index (HDI) of 128. I do not blame them for India’s record. However no other country from which the top ten were listed had such a dismal record except us. We are much behind Srilanka, China and even Namibia. HDI is based on gross domestic product(GDP), literacy levels and human life expectancy at birth.
India has one of the highest rate of malnutrition and underweight children at birth. Over the past few years inspite of a G.D.P of 9% we have fallen in the HDI from 126 to 128. This is because of our dismal literacy levels and life expectancy. G.D.P per capita is basically a non indicator in this regard.

By pursuing such policies India is going to put itself in deeper inextricable problems and the disparity between the rich and poor is going to increase alarmingly. We cannot be happy that a few people have reached the super-rich category while million others are struggling for three meals per day. This kind of unsustainable policies are going to wreck the country in the long run. The government can pursue liberalization policies if it simultaneously decides to protect the interests of the poor , but I don’t see this happening at all. The way we are going we will end up as brain deficient, retarded free market fundamentalists.