Will Modi Government's Budget address "Man-made Poverty"?

Will Modi's Government Budget address "Man-made Poverty" in villages?

By:

Vijay Sardana

When income is less than expenditure, this will lead to poverty or bankruptcy. In agriculture, when cost of production is more than the price realization from the farm output, this will lead to poverty among farmers and in rural economies.

India is a global agricultural powerhouse. It is the world’s largest producer of milk, pulses, and spices, and has the world’s largest cattle herd (incl. buffaloes), as well as the largest area under wheat, rice and cotton. It is the second largest producer of rice, wheat, cotton, sugarcane, farmed fish, sheep & goat meat, fruit, vegetables and tea. 

The country has some 195 m ha under cultivation of which some 63 percent are rainfed (roughly 125m ha) while 37 percent are irrigated (70m ha). In addition, forests cover some 65m ha of India’s land.

India’s food security depends on producing cereal crops, as well as increasing its production of fruits, vegetables and milk to meet the demands of a growing population with rising incomes.

While agriculture’s share in India’s economy has progressively declined to less than 15% due to the high growth rates of the industrial and services sectors, the sector’s importance in India’s economic and social fabric goes well beyond this indicator.

Nearly three-quarters of India’s families depend on rural incomes. In spite of significant reduction in poverty, the majority of India’s poor are found in rural areas. India is home to about 315 million poor people, 74 per cent of them residing in the rural areas. Further, the concentration of poverty is more rampant in landless agricultural labour households and marginal farm households which account for more than 50 per cent of the total poor in India. Therefore, the needs and aspirations of these vulnerable groups must be taken care of to ensure inclusive growth in agriculture.

Poverty alleviation has been an overarching goal of India’s development efforts since its Independence. In order to address this socio-economic objective, the planning process in the country has devised several interventions.

The Government of India, deeply concerned with widespread poverty, has implemented several anti-poverty policies and schemes. These policies and schemes have helped in creating livelihood opportunities for the affected segments of the population.

Many policies are targeted to improve the provisioning of public services and goods for improving standard and quality of life, strengthening of institutions and delivery mechanisms to empower the poor, and targeted development of backward regions through resource transfers and supportive policy measures.

Though there has been a significant decline in the incidence of poverty at the national level in India, but at the same time there are several concerns that take away the credit from this accomplishment.

To address these challenges, agriculture must be productive, globally competitive, diversified and sustainable and grow at faster pace.

Some of the key facts contributing to poverty are:

1. Rapidly Rising Population:

The population during the last 45 years has increased at the rate of 2.2% per annum. On average 17 million people are added every year to its population which raises the demand for consumption goods considerably. According to author’s estimate, India will need about 20 million tons to food every year to feed her population.

Estimated food requirements of India by 2030 are given in the table below:

Demand projections by author based on various recommend parameters (in million tons)
Category	Production In 2015 (Estimated.)	Demand By 2030 (Projected)	Required Growth in production per year (in Million tons)
Pulses	17.2	40.0	1.52
Coarse Cereals	41.7	102.0	4.02
Wheat	88.9	95.0	0.41
Rice	104.8	156.0	3.41
Oilseeds	26.7	70.0	2.89
Milk	146.3	182.0	2.38
Fish	10.1	16.0	0.39
Egg	39.2	57.0	1.19
Meat	6.0	15.0	0.60
Fruits	86.0	110.0	1.60
Vegetables	167.0	180.0	0.87
Tea	0.9	1.1	0.01
Sugar	25.0	33.0	0.53
Total food Demand	759.8	1057.1	19.82
Please note: Demand for many other items which make part of food system is yet to be estimated. Source: Sardana, Vijay, The POLITIECONOMY, Int’l Research Journal of Political Economy, Volume 3, Issue 1, September 2016, Page 135

2. Low Productivity in Agriculture and Livestock sectors:

India’s rice yields are one-third of China’s and about half of those in Vietnam and Indonesia. The same is true for most other agricultural commodities. The level of productivity in agriculture is low due to subdivided and fragmented holdings, lack of capital, use of outdated methods of cultivation, illiteracy etc. This is the main cause of poverty in the country. The current productivity and price realization from that output from the average landholding is financially not sustainable. 

Milk production is constrained in comparison to world average by the poor genetic quality of cows, inadequate nutrients, inaccessible veterinary care, and other factors. A targeted program to tackle these constraints could boost production and have good impact on poverty.

3. Under and Improper Utilized Natural Resources:

Agriculture is India’s largest user of water. As urban and other demands multiply, less water is likely to be available for irrigation. Under and improper utilization of natural resources like soil and water has resulted in low production in agricultural sector. This brought a down fall in their standard of living. Various subsidies and agriculture policies, due to political considerations, have distorted the balanced approach in input use. The majority of India’s poor are in rain-fed areas.

4. Low Rate of Economic and Agriculture Development:

While progress has been made - the rural population classified as poor fell from nearly 40% in the early 1990s to below 30% in recent years. It means the reduction was about 1% per year. The rate of economic development in India has been lower than the required level. Therefore, there persists a gap between level of availability and requirements of goods and services. This has also lead to high inflation in many food items. The net result is poverty as well as mal-nutrition

6. Food inflation and overall Price Rise:

Agricultural growth in the 1990s and 2000s slowed down, averaging about 3.5% per annum, and cereal yields have increased by only 1.4% per annum in last decade. The slow-down in agricultural growth has become a major cause for concern for food inflation. The continuous and steep price rise of food items has added to the miseries of poor. It has benefited a few sections in the society and the people in lower income group find it difficult to get their minimum needs. Rural poor is the worst sufferer of this.

7. Shortage of affordable capital and lack of pro-entrepreneurship environment:

Capital and able entrepreneurship have important role in accelerating the growth. The policies and procedures are adding to huge transaction cost and takes lot of time and effort of any entrepreneurs to deal with these red tapes and systems and make it is difficult for any new entrepreneur in rural areas to survive without external financial support in initial years. There is need to look at these issues as well to promote employment in rural India.

8. Unemployment:

Due to growing population in rural area and shrinking job opportunities and un-remunerative agriculture land holdings is adding to the continuously expanding size of unemployed in rural areas is another cause of poverty. The job seeker is increasing in number at a higher rate than the expansion in employment opportunities in other sectors.

In order to ensure inclusive growth, the emphasis on having a more desirable composition of gross domestic product (GDP) growth by targeting an average 4 per cent per annum growth in AgGDP has found favour with the policy makers in the country’s.

9. Lack of accountability and targeted performance in Agriculture research

The quality of research and extension services have declined over time due lack of understanding of agriculture research at policy planning level resulting in chronic underfunding of infrastructure and operations, no replacement of aging researchers or broad access to state-of-the-art technologies. Research now has little to provide beyond the time-worn packages of practices from the past. Public extension services are struggling and offer little new knowledge to farmers. There is too little connection between research and extension, or between these services and the private sector.

10. Lack of Risk management and developed through social institutions: In India we have one of the best cooperative institutions like Amul Dairy, etc. We failed to create similar institutions due to political shortsightedness under the influence of vested interest of the local political interest. These institutions have eliminated poverty in their areas of operation.

Will Modi Government's budget develop action plan to address these challenges, let us watch the budget carefully.