As per the National Statistical Office (NSO), the GDP growth figure for the December 2019 quarter was 4.7 per cent. This is the lowest GDP growth rate registered since the March 2013 quarter; the figure stood at 4.3 per cent. In the recent past, the government has said there are signs of a boom in the economy. But these claims seem hollow in view of the existing figures of the low GDP growth, rising inflation, a decline in industrial production and exports. The government is reeling under a slowing economy, rising inflation and unemployment.
The three engines of the economy — domestic consumption, exports and investments — are slowing down. The share of private consumption or demand in our GDP is about 60 per cent. So, unless the demand in the economy increases, the recession can’t be contained. Due to the problem of rising fiscal deficit, the fourth engine — government spending — cannot alone move the economy forward. According to the NSO, the GDP growth rate figure in 2019-20 is likely to remain at 5 per cent. International rating agency Moody’s has also said in a recent report on India that the GDP growth rate will not pick up unless we increase domestic consumption.
The government has no way to pull the economy out of recession. But had the government increased the allocation in schemes like the Pradhan Mantri Kisan Yojana in the Budget, the flow of money in rural areas could have been increased and the recession could have been rapidly contained. On February 24, the Pradhan Mantri Kisan Samman scheme completed one year.
The scheme provided for direct cash transfer of Rs 6,000 per annum per farming family in three equal instalments to provide financial assistance to the farmers. A budgetary provision of Rs 20,000 crore was made for this scheme which lasted for the last four months of the financial year 2018-19, but only Rs 6,005 crore were disbursed to the farmers. In 2019-20, a budget allocation of Rs 75,000 crore was made but was later reduced to Rs 54,370 crore in the revised Budget. The slow registration and verification of eligible farmers is the reason cited for the cut.
Out of the total target of about 14 crore farmers in the scheme, about 8.46 crore farmers have received at least one instalment so far. Registration, verification of farmers and linking of their accounts with Aadhaar card is in progress. Identification and registration of beneficiaries is the responsibility of the state governments. But some states like West Bengal have not registered a single farmer yet for political reasons, which is an injustice to the farmers there. In this scheme, the transfer of cash directly to the beneficiary account does not leave any scope for corruption, the subsidy is guaranteed only to the beneficiaries and the administrative expenditure is also low, saving the government money.
In view of the rising cost of cultivation, the amount to be provided under the scheme in this year’s budget should have been increased from Rs 6,000 to Rs 24,000 per annum. This will have put an additional burden of about Rs 2 lakh crore on the exchequer. If it is beyond the capacity of the Central government to bear it, half of it can be borne by the state governments. Many state governments have similar cash transfer schemes which could have been merged with this scheme.
If we were able to give Rs 24,000 to each farmer, it would have given a boost to the purchasing power in rural areas and the expenditure would have pushed the demand. With the increase in demand, sales would have increased and also the production with the employment, bringing back the amount spent by the government in the form of both direct and indirect taxes. The additional flow of this money into rural areas would also have had a multiplying effect on the economy, making it grow at a faster pace. If the actual economic assessment is made, the additional amount spent on the Pradhan Mantri Kisan Yojana would have come back to the government as increased tax amounts. But for the next financial year, the budget for the scheme has been kept at Rs 75,000 crore.
Last year, reducing the income tax rate of domestic companies from 30 per cent to 22 per cent has led to a burden of about Rs 1.5 lakh crore on the government, which will continue to increase in the coming years. The government was hopeful that reducing the income tax would increase the investment by the companies, but that did not happen. In the absence of any demand, when most of the industries are not producing at their full capacity, there is no question of investment in the new industries. If this money was made available to the farmers by increasing the budget allocation to the scheme, the demand in the economy would have increased immediately, thereby increasing industrial production and increasing both the possibilities of new investment and employment. It was expected that the government will consider this point while passing the budget and would increase the budget allocation to the scheme.
Apart from increasing the budget allocation, the biggest improvement to the scheme would be to complete the registration and verification of all farmers by next year. In this scheme, the farmers get the instalment after verification, they are not given the instalments distributed to other farmers who have already been verified.
Secondly, after verification, whichever farmer is found eligible, should be paid all instalments due from December 1, 2018. This would discourage any economic reason or inducement to save money by keeping the farmers out of the scheme for more and more time by slow verification.
Thirdly, if the amount allocated under the scheme is not distributed in time, the undistributed amount may be added to the next year’s budget. It could be carried forward. The remaining amount may be redistributed to the farmers after verification.
Fourthly, the amount of this scheme should be increased every year by adding at least five per cent to the rate of inflation. This will continue to maintain the economic value of the scheme amount respectable.
In the agriculture sector, we have long adopted restrictive trade and marketing policies which have caused great losses to our farmers. According to the Organization for Economic Cooperation and Development (OECD), an organization of 36 developed countries assessing economic policies, the OECD countries in 2016 helped their farmers with an average of $235 billion (about Rs 17 lakh crore as per today’s prices).
This year, China too helped its farmers with $232 billion dollars. If the OECD countries and China can spend an average of about Rs 17 lakh crores on their farmers to strengthen their economic base, can we not even give Rs 2-3 lakh crores to our farmers through this scheme? If we want to become a world power by competing with China, we have to empower our farmers through positive agricultural policies like that of China. We have to help our farmers like other countries through such schemes. The dream of becoming a $5 trillion economy can only be realized through the economic empowerment of 70 per cent of the population which lives in rural India.
Pushpendra Singh is the head of the Kisan Shakti Sangh
(Views are personal)
