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Budget 2018 Must Stop Throwing Money at Rural Farmer Distress

Instead let’s focus on creating policies that encourage farmers to think more like savvy businesspeople and less like objects knuckled under nature’s mercy.

Every January we go around this mulberry bush as the media thoughtfully shows up the ruling party’s superficial efforts to appease its major voting demographics. How many more rural farmers will have to die before society learns that empowering farmers to feel like they have more power over the outcomes of their lives would be a better allocation of a budget than reactive crore ear marking?

The 2017-2018 budget increased allocation for rural, agriculture and allied sectors by 24 percent to Rs 187,223 crore, over the previous year’s budget.

The 2017 Budget saw the agricultural credit target increase from Rs 9 trillion to ten trillion rupees; Budgetary provision for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) increase from Rs 47,499 crore to Rs 48 000 crore); coverage of cropped area under Fasal Bima Yojana increase with budget provision for the crop insurance scheme increasing from Rs 5500 crore to Rs 9000 crore and a micro irrigation fund with an initial fund of Rs 5000 crore.

Union Agriculture Minister Radha Mohan Singh said 11,400 farmers committed suicide in 2016. The ‘suicide data’ for 2017 is not readily available, but there’s still unrest among the farmers; so much so that BJP lost in Gujarat due to dissatisfaction among the rural constituency largely made up of farmers as other mainstays of the agrarian society stage protest at Jantar Mantar replete with searing imagery symbolizing their anger and frustration.

The increased budget allocation hasn’t made farmers happy nor has it improved agricultural output. The Hindustan Times made a grim note of this in a 2017 report: Chhattisgarh, MP and Rajasthan have seen agricultural output decline over the years.

Ramesh Chand, a member of the National Institution for Transforming India (NITI) Aayog and PhD holder in Agricultural Economics was quoted in India Today, “Loan waiver is not an effective solution on farmers’ suicides. The loan waiver does not yield an expected result even after spending big amount on it. Loan waiver can’t bring financial stability to the farmers.”

Vineet Rai, a venture capitalist and founder of Aavishkaar, continues his work to bring innovation to rural areas from his time as CEO of Gujarat Government’s Gujarat Grassroots Innovations Augmentation Network.

“Last year’s budget had a few path breaking proposals for the agriculture sector…unfortunately it did not break the path,” he said.

Ramakrishna Nishtala, MD and CEO of Vistaar Financial Services, a loan provider to MSMEs especially in rural areas said, “I think it is completely impractical for the government to give loans and relief packages. There is a lot of empirical evidence to suggest that the farmers' plight is not alleviated even after waivers and that after a couple of years, they are back in the same situation”.

From the media to the experts to the farmers themselves, the proof shows money is not fixing the problem. So why isn’t anyone listening?

Teaching rural farmers to embrace ‘Agripreneurship’

“Capital is not a constraint if a budget can create supportive policies. There are investors ready with the money. If the government supports them and improves structural efficiency then funds too can be channeled efficiently,” says Vineet.

Here’s an idea to make marginal farmers less risky candidates for bank loans:

“Instead of giving subsidies, the government should perhaps set down a 10k crore [or very large] guarantee fund to encourage innovation in financial services using technology,” suggests Vineet.

“And once you have the guarantee fund, you have to unshackle it,” he finished. [Read: it cannot be a maze of bureaucratic procedures].

Aavishkaar has invested in a few ‘agritech’ startups, one of which he says could bring us very close to doubling farmer income by 2022.

Ergos is an agri-supply chain firm encouraging smaller farmers to store their produce in warehouses. “Then we help farmers get a loan from the bank against the stored harvest. Five months later we help the farmer sell it at a much higher price. Our calculation is that over the last three years we have been able to increase farmer income by 1.6x on an absolute basis and if you take into account the interest that they have paid, then by 1.4 times. PM wants to double income in five years, I’m saying 1.4x in six months,” said Vineet.

“AgroStar has made a change we never thought possible. It’s like Amazon for farmers.” AgroStar is a digital platform where farmers can procure quality agri inputs at fair prices just by using a mobile phone – it doesn’t even have to be a smartphone.

Along with entrepreneurs taking an active interest in disrupting the primitive landscape of agrarian India, there is a need to transform a farmer’s attitude to farming; think not of it as an act of survival but an act of business. “I personally believe a farmer has to become an ‘agripreneur’,” says Vineet. The connotation is that a farmer just like any other business professional must draw on methods that won’t leave her completely at the whim of changing weather patterns. Transforming mindsets will be an uphill task for any government and certainly not as easy to achieve as setting up another fund.

“There is no doubt that a situation where 50 percent of the country's [farming] population contribute only 15 percent of the GDP is not a sustainable one.

Instead the government should look at investing in rural infrastructure, irrigation, encouraging crop diversity and withdrawing the Minimum Support Price regime all together - all of which would be economically sensible but politically challenging,” says Ramakrishna. “But someone has to bite the bullet keeping the country's and the farmers' long term interests in mind.”

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