The Hindu Business Line : A poor yield for the farmer

The Government has committed itself to raising the rate of growth of the agricultural sector to 4 per cent. But it has no concrete plans for achieving this. An effective solution would be to develop a land market where farmers on the brink can dispose of their land, taking advantage of the boom in the real estate market.

BUDGET DOES not have anything much to offer the beleaguered farmer.

The Finance Minister, Mr P. Chidambaram, had promised a sweet dream Budget. Evidently, he meant that he would improve on his dream Budget of the past. But, perhaps finding this a challenge, he decided to offer at least a `no-nightmare Budget'.

In a rather nuanced manner, the Finance Minister told his Left friends that growth is the best antidote to poverty.

MISLEADING GROWTH

The Indian economy is on a high, the stock market is in an unprecedented boom, the GDP is growing at 8.1 per cent and accelerating, thanks mainly to the manufacturing and the service sectors. The fly in the ointment, as it were, is agriculture.

While the GDP is growing at 8.1 per cent, agriculture is trailing at 2.1 per cent. This figure is also misleading because agriculture had negative growth last year. Even the much-vaunted foodgrains production is less than the figure three years ago.

The Government has committed itself to raising the rate of growth of the agricultural sector to 4 per cent. But it does not have any concrete plan for achieving this, beyond the recommendations of the Dr M. S. Swaminathan report. Worse still are the spate of farmer suicides in a regime that swears by the aam aadmi (common man) and whose Minister for Agriculture takes pride in being a farmer himself. Nor has the Budget anything much to offer the beleaguered farmer.

IRRIGATION EFFORT

The Accelerated Irrigation Benefit Programme (AIBP) outlay on irrigation for 2005-2006 was Rs 4,500 crore plus a grant of Rs 1,680 crore, adding up to Rs 6,180 crore. The States were expected to spend Rs 2,520 crore. The sum total of funds for irrigation last year was Rs 8,700 crore. This year's allocation of Rs 7,121 crore, indeed, represents a net reduction. If one considers the carry over of works worth about Rs 4,000 crore from last year, it is clear that the Budget leaves irrigation quite high and dry. As many as 20,000 water bodies and a command area of 1.47 million hectares have been identified in the first phase of the AIBP. The Finance Minister promises to seek funds from multilateral agencies. The participating State governments are also expected to sign a Memorandum of Understanding. In brief, little has been done since the last Budget and little is likely to happen in the coming year.

Since last year, the Ministers for Finance and Agriculture have been harping on making more money available for agricultural credit. Even granting that this has actually reached the farmers, though only few have access to bank credit, the question is if the government intends to convert agriculture into a loan economy.

Credit is meant as a bridge, during periods of temporary difficulties in a business which, in the long run, is profitable. Agriculture, being the losing proposition it is, promoting credit might actually make the situation of the farmers more untenable and drive more of them to suicide. It is also questionable if last year's promised credit increase, from Rs 80,000 crore to Rs 1,30,000 crore, actually happened. The promise of increasing the availability of credit to Rs 1,41,500 crore or Rs 1,75,000 crore will need to be taken with a pinch of salt.

CHEAP CREDIT

The Finance Minister holds out the promise of short-term credit from the co-operative credit structure and the Regional Rural Banks to be refinanced by the National Bank for Agriculture and Development. Nabard, it is said, is to continue to provide the refinance at an economical rate so that the farmer ultimately gets the loan at 7 per cent up to a limit of Rs 3,00,000.

For quite some time, the Central ministers have been talking about making loans available to the farmers at a maximum rate of 7 per cent. This has not happened. The Finance Minister has only repeated this promise.

The Finance Minister has offered farmers a concession of two percentage points on the Prime Lending Rate.

The fact is that most cooperative societies charge compound rate of interest at quarterly or half-yearly rates.

The sop of two percentage points makes little sense in the circumstances and amounts to rubbing salt in the farmers' wounds.

If farmer suicides are to be stopped, two measures are necessary. The Dr M. S. Swaminathan report recommended that credit should be made available at 4 per cent.

This would present some problems. But the farmers could be easily assured of loans at 7 per cent.

The more effective measure would be to develop a land market, where farmers on the brink would be able to dispose of their parcels of land, taking advantage of the boom in the real estate market, and making place for those who feel they have what it takes to take on the international competition.

(The author is Founder, Shetkari Sanghatana and Member of Rajya Sabha. He can be reached at sharad.mah@nic.in)

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