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Thursday, Nov 21, 2019

Why rural distress didn’t hurt the BJP in Lok Sabha elections

The agrarian crisis that BJP government faced in its first term was brought due to worsening terms of trade.

editorials Updated: Jul 21, 2019 07:13 IST
Roshan Kishore
Roshan Kishore
Hindustan Times, New Delhi
Prices of output produced in the agricultural sector are increasing at a slower pace than the prices of non-agricultural products.  But, Congress or any other political party did not criticise the BJP for the sharp fall in food inflation under the first Modi government.
Prices of output produced in the agricultural sector are increasing at a slower pace than the prices of non-agricultural products. But, Congress or any other political party did not criticise the BJP for the sharp fall in food inflation under the first Modi government.(Raj K Raj/ Hindustan Times)
         

Rural distress seemed to be the proverbial Achilles’ heel for the Bharatiya Janata Party (BJP) before the 2019 Lok Sabha elections. Results of the 2017 assembly elections in Gujarat and the 2018 elections in the heartland states of Rajasthan, Madhya Pradesh and Chhattisgarh suggested that the BJP was politically more vulnerable in areas which had a higher share of rural and farm-dependent population. Instead of strengthening, though, these potential rural headwinds all but disappeared for the BJP in 2019, and it increased its 2014 seat tally of 282 to 303 in 2019. Even in Gujarat and heartland states where the BJP fared badly in assembly elections, it drastically improved its performance in 2019. This kind of a mandate raises questions on the validity of the rural-distress-could-hurt-the-BJP thesis. So what exactly happened? Here’s one possible explanation.

The nature of crisis in agriculture which developed under the first term of the Narendra Modi government was not a crisis of production but that brought about by worsening terms of trade. Two sets of statistics can explain this. In terms of compound annual growth rate (CAGR) of Gross Value Added (GVA) in agriculture, the period from 2014-15 to 2018-19 (3.7%) was worse than 2009-10 to 2013-14 (5.5%) and only slightly better than the 2004-05 to 2008-09 (3.2%) phase. The last two time periods refer to the terms of first and second United Progressive Alliance (UPA) governments. To be sure, CAGR comparisons in Indian agriculture are not as straightforward as they are for comparing overall economic performances. This is because the performance of the monsoon is an important driver of agricultural production. For example, 2008-09 and 2009-10 were rainfall deficient years in India with overall rainfall being less than the Long Period Average (LPA). Lower rainfall leading to lower production in these years could have skewed the CAGR calculation for UPA-I and UPA-II. While there can be a debate around the magnitude of production growth in agriculture under the past three governments, an unambiguous claim can be made about another important determinant of well being of farmers. If one were to compare the difference between nominal and real growth in agricultural and non-agricultural economy, there is a stark contrast between how the two have moved under the first Narendra Modi led government. While the nominal component of agricultural growth has continued to decline and became almost negligible by 2018-19, there has been a revival in the nominal component of non-agricultural growth.

 

 

The difference in nominal growth trajectories of agriculture and non-agricultural sectors has led to what is described as worsening of terms of trade for agriculture by economists. Simply speaking this means that prices of output produced in the agricultural sector are increasing at a slower pace than the prices of non-agricultural products. This is a serious problem for farmers, because it means that they have to sell more of their output to be able to afford the same non-agricultural commodities. Simply speaking, a worsening of terms of trade means an increasing squeeze on farm incomes. This bit is not new. Many including this author have referred to it in earlier writings. Why did farmers not punish the BJP for presiding over a worsening of terms of trade for agriculture in the 2019 elections then?

The assumption that a worsening of terms of trade for agriculture will hurt the incumbent party is based on the premise that there is a significant section of voters who stand to benefit from higher agricultural (food) prices. That lower food prices benefit those who buy rather than produce (and hence sell) food is obvious. A look at statistics from National Sample Survey Office (NSSO) reports suggests that this premise might not be true in case of the Indian economy.

Food expenditure continues to have a very high share in total consumption expenditure of Indian households. According to the 2011-12 consumption expenditure survey (latest available figures) conducted by the NSSO, almost 80% of rural households and 40% of urban households spent half of their monthly spending on food items. Also, food expenditure had a bigger share among rural households than urban ones across all classes.

The figures given above mean that there is a significantly large section in India, including in rural areas, which stands to gain if food prices go down. This is because lower food prices allow them to spend more on non-food items.

India’s high food consumption expenditure share levels provide an in-built insurance to any regime which manages to bring down food prices. This is a big reason why the Congress or any other political party did not criticise the BJP for the sharp fall in food inflation under the first Modi government. This is not the only factor which limited potential political losses for the BJP form a worsening of terms of trade for agriculture.

Unlike what is often believed, even agricultural households have begun to explore multiple sources of incomes in India. A 2013 NSSO report shows that net receipt from cultivation accounted for only half of the total monthly income for agricultural households in India. This share increases as one moves to poorer to richer households. The report defined agricultural households as those who received not less than Rs. 3,000 of produce from farm activities in the preceding 365 days. As is to be expected, income from cultivation was much higher for richer households given the fact that they own more land. The report also shows that inter-class inequality in income from cultivation was much higher than income from non-cultivation activities for agricultural households. Income from cultivation for top ten percent of households was more than four times that of the bottom ten percent. In case of non-cultivation incomes, this gap was less than three times.

These statistics are extremely important in deciding the burden of worsening of terms of trade for agriculture on farmers. A higher share of cultivation incomes in total incomes for richer households and a greater income inequality in cultivation incomes compared to non-cultivation incomes for agricultural households means that it is the rich farmers who are more affected by a worsening of terms of trade for agriculture.

While this does not mean that the relatively less well off agricultural households would not have experienced a squeeze on their incomes, it needs to be remembered that the previous government was more pro-active in supplementing their incomes and well-being. Schemes such as provision of subsidised toilets, a bigger push for rural housing and announcement of PM-KISAN involving a cash transfer of Rs. 6000 for farmers owing up to two hectares of land (this was universalised by the present government) just before the elections were all meant to cushion the not so well off population in rural India.

It is also important to keep the caste equation in mind while looking at the impact (or lack of it) of rural distress due to low food prices on the elections. Upper castes have a disproportionately high share among rich farmers in India. NSSO data shows the share of agricultural households who did not belong to Scheduled Tribe (ST), Scheduled Caste (SC) or Other Backward Class (OBC) among richer agricultural households is significantly higher. This also means that upper caste farmers would have faced a biggest squeeze on their incomes because of worsening of terms of trade. This is one social group the BJP could have taken for granted politically. Because of various factors, especially the growth of Mandal politics in the form an alliance between Muslims and dominant OBC caste groups in states such as Bihar and Uttar Pradesh, the upper caste population has increasingly aligned itself with the BJP. Even in states where the Congress and the BJP were in direct contest against each other, the BJP could have successfully clubbed the Congress with the anti-upper caste Mandal based parties, which would have been its alliance partners in case a non-BJP coalition government were to be formed at the centre. The BJP’s efforts to neutralise upper caste anger were not confined to attacking the Opposition. It also announced 10% reservation for economically weaker sections among upper castes.

Despite such efforts, previously unaligned upper caste BJP voters displayed the lowest amount of pro-incumbency for the Narendra Modi government during the 2019 elections. This can be seen from the post-poll survey data released by CSDS-Lokniti. The share of upper caste Hindu voters who supported the BJP increased by 10.6% between the 2014 and 2019 elections. This is less than the growth in BJP’s support among Hindu OBCs (29.4%), SCs (41.7%) and STs (18.9%). To be sure, the BJP does have a very high support base among upper caste Hindus. However, what it also worth noting is that with an increase in support from socially deprived Hindus, the importance of upper caste supporters in the BJP has gone down significantly just between 2014 and 2019. In other words, upper caste voters are now more dispensable for the BJP today than they were earlier.

What do the statistics given above mean for the future of agrarian politics in India?

If the BJP continues with its policy of keeping the terms of trade against agriculture, it stands to gain among urban voters and non-rich and socially deprived rural voters. After all, low food prices free greater share of earnings to be spent for other purposes. By not spending a larger amount on higher Minimum Support Prices (MSPs) – they were only raised significantly towards the end of the government’s tenure – the government could also spend more money on welfare programmes such as construction of toilets and houses. As long as the opposition does not make a conscious effort to target the BJP’s upper caste support base, there will be little material traction for any politics which tries to punish the BJP for keeping farm prices low. This however would require a two-pronged approach. First, the old Mandal style politics of consolidating dominant OBCs and Muslims and alienating upper castes will have to change. Second, the opposition will have to decide whether or not it wants to precipitate a polarisation between the agricultural and non-agricultural economy on the terms of trade question.

While the statistics discussed above suggest that only rich farmers lose more when farm prices go down compared to non-farm prices, this need not be the case in all situations. For example, if the government were to move towards a broad based public distribution system involving not just rice and wheat but also pulses and vegetables etc., a significant number of poor including those in rural areas would be insured against rising food prices even as they would stand to gain from the overall rise in rural incomes. Such a programme is not as radical as it sounds.

Even in a developed country such as the US, the food security programme has a much wider coverage than just providing cereals at subsidised prices. If such a programme were to be implemented through promoting cooperative marketing models involving farmers, it could also lead to an increase in farmers’ share of value added in agriculture by taking away the market share what are now increasingly becoming corporate controlled food chains. A political push for such a programme will face important challenges.

Any efforts by the opposition to attract upper caste farmers will have to pitch an occupational solidarity rather than vulgar caste appeals, lest the socially deprived sections, majority of which still do not vote for the BJP, shift their political loyalties.

Developing such an occupational solidarity among the farmers has never been an easy job in India, and is even more difficult today, as more and more farmers are looking for a way to get out of agriculture rather than make efforts to make long-term investments, both materially and politically. Unless, the opposition can resolve this impasse, the BJP need not worry about a political backlash from deterioration in terms of trade for agriculture.