COMMENTARY – Modi now needs fresh big push to support farm incomes

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Prime Minister Narendra Modi and BJP party President Amit Shah acknowledging crowds after winning the parliamentary election win.

Few things would have probably given Prime Minister Narendra Modi as many sleepless nights prior to elections as how to please farmers, who say the  demonetisation program has hurt their incomes.

As he prepares to start a new five-year term after his party’s stunning election victory, he still has a tall unfinished agenda on that count, especially with a looming deficit monsoon that could further drag down rural wages.

The government’s bet on hiking the minimum support prices for nearly all major crops late last year has hardly helped due to the lack of an efficient procurement system. Only two of the biggest crops, rice and wheat, benefit from a dedicated procurement mechanism for staples, and therefore a bigger policy frameworks is urgently needed.

Nearly half of Indian districts are already reeling from a drought, which means detailed planning and execution would be needed to relieve the strain of farmers. 

Some bright spots have emerged under the Modi government, including a rapid improvement in road connectivity that helps farm goods reach markets faster. But dramatic improvements are still needed in other areas like refrigeration, as nearly 30% of India’s fruits and vegetables goes waste each year due to lack of proper infrastructure.

Besides significant investments would also be required in rural infrastructure such irrigation amid plunging water tables and increased reliance on water-intensive crops that yield a harvest quicker than counterparts.

Crop productivity too remains an issue as it remains among the world’s lowest, despite being blessed with one of the highest areas of arable land.  Besides a programme for guaranteed rural employment is required as many of the small and marginal farmers have turned nearly broke as they relied upon loan sharks and middlemen to tide over a cash crunch.

The cost of inputs for farmers would likely spike upward in coming weeks due to a surge in intentional oil prices, which are up 33% year to date. That, in turn, could impact diesel and fertilizer prices as well.

Policy support to help farmers’ income have bigger implications for improving a slowdown in the economy. Farmers account for around half of the country’s workforce and therefore helping them is bound to improve consumption of consumer goods including cars, which has seen sliding sales in the past few months.

Therefore, ignoring the farmer’s plight would only likely see a compounding effect on farmers, which means it will be hard for India to get out of its rural distress.

Bandini Chatterjee, the columnist, is an independent analyst focusing on the ups and downs of the commodity markets

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