Post demonetisation, a farmers’ wish list from the budget
What an Indian farmer can wish from the upcoming union budgetopinion Updated: Dec 22, 2016 23:17 IST
Kisan Swaraj, or the farmers’ movement, in pre-budget consultations with the government, has demanded that in the immediate run there be an exemption from demonetisation to all farm-related transactions. Contrast that with the view from the finance minister who declared that the cashless economy and its associated changes were the new normal. Assuming that this was the new normal or new quasi-normal, what could a quintessential farmer wish from the upcoming union budget? Below I present five natural fallouts of demonetisation for the budget wishlist now that the chinks in the armour of liquidity-driven non-arm’s length spot transactions for agricultural products have been somewhat laid bare.
•Small and local might not be beautiful: Demonetisation should engender a greater buy-in for a common market for agricultural products or in other words, a market within which no institutional or legal barriers to the circulation of products exist and producers or traders can sell with the same freedom across state borders as they can within their own state. The limits of circumscribing markets should now be more vivid post demonetisation. In the budget, the movement towards GST and National Agricultural Markets could get not only a policy push but also a greater demand pull. If analysis were to show that e-markets in Karnataka helped dealing with the situation better, that would make a strong case for electronically integrated markets.
•A new shot in the arm for the direct benefits transfer (DBT) schemes: The government has been contemplating a comprehensive move towards DBT schemes for food as well as for disbursing agricultural subsidy such as for fertilisers. Liquidity starvation if at all in the times of sowing, when specific and timely inputs are needed, could make the farmers more enthusiastic about DBT schemes. The question to ask: If there were a functional DBT scheme for agricultural inputs, would the crunch be as much in getting time-sensitive inputs as required or could it be mitigated?
•Mainstreaming market risks in agriculture: Much of the discourse with regard to agriculture focuses on production risks due to the vagaries of nature. Demonetisation would have awakened people about the power of markets in agriculture and its relative importance. Even if the government were to institute an income guarantee scheme for the farmers, it should adequately account for market risks. The government has been advocating doubling of farm incomes. It would be important first to get the markets right in this quest. The large-scale insurance scheme in the form of the Pradhan Mantri Fasal Bima Yojana still focuses on production risks but there could be an increased realisation of covering for market risks.
•Formal could be normal too for farmers: Given the fragmented landholdings, one of the essential policy solutions has been to collectivise and to create scale. The dairy cooperative model has been presented as a glowing example of success of farmer’s collectivisation. Knowing its potential effects, the government announced 2014 as the year of farmer producer organisations (FPOs). FPOs can be either as a farmer cooperative or a farmer producer company, the latter being the formalised counterpart. Given the increased need for credit, with an attempt to reach farther markets and hence meet quality and safety needs, demonetisation might inadvertently exhibit a premium from getting more formal in the form of producer companies that come under the company act. The Union Budget could provide for facilitating this switch. In the same way the budget could provide adequate funds for training farmers to be better prepared for the digital world.
• Relooking no land owning lessee farmers: Whether it is access to inputs (including hired labour) or risk incidence, the informal system with large number of lessee farmers shows its constraints quite clearly post demonetisation. The experience necessitates formalisation of the system and the budget should launch schemes to formally integrate such farmers into the system.
Devesh Roy is a research fellow at the International Food Policy Research Institute based in New Delhi
The views expressed are personal