Farming it out

Populism is a much abused term. Economists tend to dub policies they do not like as populist. Often, in our largely urban discourse on polic...

Populism is a much abused term. Economists tend to dub policies they do not like as populist. Often, in our largely urban discourse on policy matters, a concession given to industrialists is termed an “incentive”, while that given to farmers is called a “subsidy” and criticised for being populist. Hence, it is easy to dismiss the Union government’s recent concessions to farmers as being populist. Not all of them are. However, in some cases even when they may not be populist, they may still not be warranted. Distinction must therefore be made between one policy announcement and another.

The decision to reduce the

interest rate on farm credit up to Rs 50,000 and limit this to a rate of 9.0 per cent is welcome. Coming as it does after many quarters of interest rate reduction for the urban economy, this measure will be widely appreciated. However, its impact may be marginal. Apart from the limited coverage of the nationalised banking sector and the regional rural banks, which alone are directed to offer this concessional rate, the end use has also been limited to credit extended for seasonal crop loans alone. Farmers will continue to suffer from the high cost of credit unless rural banking develops further and the cooperative sector is cleaned up and depoliticised. This will require getting politics and politicians out of the banking sector. While the interest rate reduction is a welcome move, the one time subsidy given to farmers is an avoidable sop that does not address the roots of the problem in the sugarcane economy. Such governmental ad hocism of offering seasonal palliatives is what has destroyed the sugar sector. Rather than do away with the concept of a state-advised price, and reinforce the relevance of a statutory minimum price, as announced by the commission on agricultural costs and prices, the Union agriculture ministry has stepped forward to help bridge the gap through a dole. If this dole is offered to cane farmers in three states today, farmers growing the same crop or some other in other states tomorrow will ask for similar sops to bridge the gap between what they think they should get and what they in fact get. This is populist economics and the government’s sugarcane decision is therefore populist in both intent and impact.

The real support that farmers need is financial and infrastructural. Measures to improve access to credit and reduce cost are, therefore, welcome. Equally, investment in infrastructure ranging from roads to power, irrigation to education and health are the kind of interventions required. If such sustained policy attention is not paid to the farm economy and people living in rural areas and the government suddenly wakes up to farmers’ needs months before an election, its actions are bound to be dismissed as populist.