16 June 2017 13:45:52 IST

A long-time ‘deskie’, Baskar has spent much of his journalism career on the editorial desk. A keen follower of economic and political matters, he likes to view economic issues from a political economy lens as he believes the economic structure of a society is deeply embedded in its political and social ethos. Apart from writing the PolitEco column for BLoC, Baskar writes book reviews and articles on politics, economics and sports for the BL web edition. Reading and watching films are his other interests, though the choice of books and films are rather eclectic.  A keen follower of sports, especially his beloved Tottenham Hotspur FC, Baskar is an avid long-distance runner.  He hopes to learn music some day!

The farm crisis — a delayed reaction against demonetisation?

As tempting as it sounds, suggesting that note ban is the only cause of farm distress is misleading

Most of us were left nonplussed when there was a near absence of protests against the government’s botched demonetisation plan. Despite the deep disruption and pain the note ban caused, people still kept their faith in the government’s drive to combat the menace of black money.

In fact, in a panel discussion early this year, economist and columnist Sanjaya Baru even remarked that the lack of any protest against demonetisation was a ripe issue for sociologists to study.

Farmers’ stir and demonetisation

Also, the BJP’s electoral victory in the Assembly elections that followed, especially in the politically significant Uttar Pradesh, seemed to suggest that the people were solidly behind the Prime Minister on this issue and the analysts and observers had clearly failed to read their tea leaves right.

So, is the recent farmers’ agitation in Madhya Pradesh, which led to the death of six farmers in police firing, the first signs of a lagged protest against demonetisation? It is tempting to make the connection between the farmers’ stir and demonetisation, as there are enough media reports and anecdotal evidence to suggest this.

There is little doubt now, as media reports point out, that the note ban severely affected the agricultural trade post harvest. Since this trade is largely conducted in cash, its severe shortage seems to have had a strong impact on the farmers’ remuneration.

However, it would be misleading to suggest that demonetisation was the only cause for the current farmers’ distress, as there are other compelling reasons, such as the zooming input costs, the tardy procurement drive, and fragmentation of land holdings.

But that demonetisation seems to have had an immediate impact cannot be denied.

Cruel irony

The irony is that the crisis in Madhya Pradesh and some other parts of the country was precipitated by a boom in production, which led to a crash in prices. That both retail and wholesale inflation — at 2.18 per cent and 2.17 per cent respectively — are at historic lows led by falling food prices, show the effect a bumper crop has had on the economy.

Falling food prices may be a boon for consumers, especially in the urban areas, but they affect the farmers as they get lower remuneration for their produce. This is where the government is supposed to step in and procure grains at support prices, shielding the farming community from price volatility.

But the government’s procurement policy was found wanting as procurement largely takes place only for rice and wheat and that too in a few select states, leaving the rest of the farmers at the mercy of their fate.

As economist and former Planning Commission member Mihir Shah remarked in a recent newspaper column, the prices of pulses, soybean, grapes, tomatoes, potatoes, onions, milk, garlic, cumin, coriander and fenugreek have crashed and that too in the summer months. The government also cannot escape blame for persisting with easy imports when a bumper crop in the domestic market was imminent.

Political colours

The government’s reaction to the crisis has also been interesting and not devoid of political considerations. The Uttar Pradesh Chief Minister announced a farm loan waiver, as he had promised during his election campaign, as soon as he came to power.

Loans have now been waived in Madhya Pradesh and, despite Chief Minister Devendra Fadnavis’s initial reluctance, in Maharashtra too where the farmers were threatening to launch an agitation. Though this move to waive farm loans has come in for severe criticism from various quarters, both within and outside the government, the States still went ahead, wanting to douse farmers’ anger.

Interestingly, Finance Minister Arun Jaitley has said that the States will have to bear the burden of loan waivers. With the general elections just two years away, it will be interesting to see how this issue plays out.

Southern sit-in

Tamil Nadu is going through its worst drought in several decades and enduring an agricultural crisis of a more conventional kind, not where farmers are dumping bumper crops on roads. Farmers from the State sat in protest in Jantar Mantar for several days, which drew a lot of media attention, some of it derisive, for the dramatic and unique forms of protest they chose — tonsuring heads, eating dead rats. But they returned empty handed.

Prime Minister Narendra Modi did not even deign to meet them despite several requests. Clearly, farmers agitating in States ruled by the BJP seemed to be more valuable for the ruling party.