Jai kisan?

Congress leaders will make political capital out of the farm debt waiver. This is understandable, since that was the intention. Whether electoral dividends result is one issue, whether economic capital follows — altering India’s rural economy — is another. Also, will electoral campaigns find the clarity to step out of the rhetoric of the 20th century, and thereby see the opportunity to alter the terms of trade in favour of rural India?

First, the crisis dates to the late ’80s, accentuated in the ’90s, with a fiscal crunch (Centre plus states) leading to the collapse of research and extension services, spliced with regulatory collapse leading to the proliferation of counterfeit seeds and fertilisers. Second, public investments in agriculture flagged and erratic power supply was combined with hike in power costs and there was a water problem too. Third, nothing was done to solve the rural credit problem. It is obvious that a farm debt waiver does nothing for those who borrow from money-lenders or don’t take out crop insurance and it creates perverse incentives for future borrowing, apart from messing up rural banking and penalising those who don’t default. It didn’t require the Radhakrishna Committee to point out that 50 per cent of rural credit is still informal and that high procedural costs and collateral requirements deter institutional borrowing. The answer lies in freeing up rural credit delivery, with the recognition that borrowing at 12 per cent (higher administrative costs, risk premiums) and getting credit is preferable to borrowing at 30 per cent (from money-lenders). It is also preferable to directed rates of 6 per cent when one doesn’t get credit. This problem has been ducked not only by the NDA, but also in the four years of the UPA. Fourth, rural credit cannot be de-linked from rural insurance, since large chunks of credit are for sudden exogenous shocks. That the present crop insurance doesn’t work and needs liberalisation is also known. Suicides are linked to exposure to risk consequent on commercialisation and diversification.

There is attention, rightly, on high food prices. However, how much actually reaches farmers? Studies show dis-intermediation gains of 25-30 per cent, with farmers obtaining higher prices without consumers paying more. How much of the dis-intermediation agenda has any government followed? It has happened for fruits and vegetables more by default and never for food-grains. Since Delhi is visible and elections are due here too, how about the UPA demonstrating its commitment to farmers by breaking the agro distribution chain in Delhi as a pilot case? It is then that one realises these distribution chains are controlled by the lower rungs of political parties. There is a land market issue too, not to be confused with removing caps on ownership, since one can legalise tenancy without changing ceilings. Will we hear any of this in the campaign for the 15th Lok Sabha?