Business Today

How It Stacks Up

The good and the bad of Modi government's economic performance.

Team BT analyses the key sectors that benchmark the performance of the NDA government led by Prime Minister Narendra Modi:

Agriculture: Distress Signals

By March 31, over 40 million small and marginal farmers would have got Rs 2,000 each in their bank accounts as direct income support under the Pradhan Mantri Kisan Samman Nidhi (PM KISAN) Scheme launched early this year. The scheme, which will pay 125 million farmers' families Rs 6,000 per year in three installments, has been projected as the government's biggest farmer friendly initiative. The scheme is also an acknowledgement of the long persisting crisis in India's agrarian and rural economy.

The BJP's losses in the recently concluded assembly elections in Madhya Pradesh, Rajasthan and Chhattisgarh were attributed to farmers' ire and rural unrest despite the much publicised initiatives like the Pradhan Mantri Fasal Bima Yojana (crop insurance), Har Khet Ko Pani (micro irrigation), e NAM (digitally connected national agriculture produce markets), increased MSP and rural employment guarantee schemes like MNREGA. This clearly indicates that even record foodgrain production (an estimated 281.37 million tonnes in 2018/19) has not resulted in a corresponding increase in farmers' income. The key reason was the conflicting policy objectives in the last five years.

When the Modi government took charge, its first priority was to tame runaway food inflation, which was 9.4 per cent in 2013/14. Moderation in MSP increase, imposition of stock limits to deal with cartelisation and hoarding, import of pulses and open market sale of procured foodgrain saw that there was a decline in inflation. It helped consumers but was in direct conflict with another promise in the BJP's 2014 election manifesto enhancing profitability in agriculture by ensuring at least 50 per cent profits over cost of production.

"We had two back to back bad monsoons (2014/15 and 2015/16) and so the aggregate production had declined. That was the time when the new government was trying to crack down on inflation, so prices did not increase. Rural allocations (for schemes like MNREGA) were also cut down as the government was trying to bring down the fiscal deficit. Thereafter, when rural income started picking up because of good monsoon and better produce, came demonetisation (2016/17). Growth slipped again. That is why despite two consecutive good monsoons and overproduction, farmers' income has refused to increase," says Sachchidanand Shukla, Chief Economist, Mahindra and Mahindra. Shukla says the government has learnt how to tackle a bad monsoon (better crop insurance) but is yet to know how to respond to an oversupply situation.

In fact, the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM AASHA), announced in 2018, was an attempt to tackle the procurement problem. The PM AASHA was a combination of three interventions Price Support Scheme or conventional system of procurement of foodgrain by government agencies, Price Deficiency Payment Scheme or payment of the difference between the market price and the MSP, and finally a pilot project to involve the private sector, the Private Procurement & Stockist Scheme. As on March 21, government agencies in charge of procurement, the Food Corporation of India and the National Agricultural Cooperative Marketing Federation of India, had procured only 45.68 per cent of the sanctioned quantity of wheat, rice and pulses, during the just ended winter

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