Mumbai: Budget 2018, economists say, will focus on the rural economy and give a boost to consumption in the countryside. The farmer has no such expectations.
“We have no hope from the government,” said Vijay Petkar, a cotton farmer from Vijaygopal, a village of 4,000 people in the Vidarbha region of Maharashtra.
Petkar says the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) “talks a lot but we don’t get anything”.
Last year, Petkar was unable to send his two children, aged 11 and 9 years, to the municipality school in Pulgaon, 18km away from his village.
He had to cut his expenses because his cotton crop failed and soya prices declined, leaving him in debt.
The story is similar across most of rural India, which has in recent years been roiled by drought, demonetization and falling prices of farm produce.
Up to 70% of India’s farmers depend on the June-September monsoon rainfall to water their crops and they are experiencing an agrarian crisis that has forced them to pull their children out of school and even skimp on their healthcare expenses, said Ashwini Kulkarni, secretary, Pragati Abhiyan, a non-government organisation that works with the poor. The implications will be felt for years to come, said Kulkarni.
To be sure, the government has increased rural spending over the past three years. Against an average increase of 9% in total spending, rural spending has grown at a higher clip of nearly 16%, analysts Gautam Duggad and Nikhil Gupta wrote in a 23 January report by Motilal Oswal Securities Ltd.
Rural spending as a percentage of total spending has moved from sub-6% between financial years 2014 and 2016 to 7.6% in 2018. That, however, has not helped improve the rural perception, which is one of neglect.
“The farmer is being ignored by the government,” said Dilip Pohane, a farmer from Wardha, who says farmers have no money to spend.
Demonetisation worsened their situation because even farm workers weren’t able to get paid.
“In the last three years, the average increase in rural wages has been about 5%. Prior to that, for a couple of years it was 15%. Rural wages have a major role to play in rural growth,” said Sanjiv Mehta, chief executive officer, Hindustan Unilever Ltd-India’s largest packaged consumer goods (CPG) maker-at a 17 January press conference on the company’s December quarter earnings.
Moreover, the minimum support price (MSP) has also declined for some commodities. For instance, in October 2015, tur dal was Rs20,350 per quintal and is now Rs5,900 per quintal, according to Bloomberg data. Likewise, sugar in Mumbai is selling at its lowest price since February 2015 at Rs3,276 per quintal, according to Bloomberg.
“About 10 years ago soyabeans were at a higher price in nominal terms,” said Sudha Narayanan, associate professor with research interests in topics like agricultural economics and development economics, Indira Gandhi Institute of Development Research (IGIDR), in a telephonic conversation with Mint.
According to Narayanan, the informal sector has taken a huge hit and people have been postponing spending even on essentials.
Given the grim backdrop and a string of assembly elections leading up to the general elections next year, analysts and industry experts are expecting a populist budget that will aim at a recovery in the farm sector and rural consumption.
Dhananjay Sinha, head of research at Emkay Global Financial Services Ltd, expects the focus to veer towards ensuring better prices for fruits and vegetables, higher fertilizer subsidies, investments in food procurement and aggressive targets for farm credit.
Narayanan of IGIDR expects the budget this year to include measures like direct payment to farmers.
The government may not be able to afford being too generous given the pressure on its finances after Goods and Services Tax collections fell short of expectations.
“We believe that the government has limited financial resources to propose any targeted scheme for the poor,” Motilal Oswal Securities analysts wrote in the report cited above.
The securities house expects the government to revise its deficit target to 3.4% of gross domestic product in fiscal year 2018, higher than the budgeted estimate of 3.2%.
