Rural India unimpressed by farm law repeal

Prime Minister Narendra Modi made a surprising announcement on November 19 that the government would repeal the three contentious farm laws in the winter session of Parliament. The farm laws have been resolutely and tenaciously opposed by farmers’ organisations for about a year. The government’s stance towards the determined but peaceful opposition has been obstinate, disproportionately heavy handed and often menacingly fierce. The Prime Minister’s announcement to backtrack was therefore, surprising across the political divide on the subject.

A remarkable fallout of the announcement was the measured response of the farmers’ organisations. They did not break into the bhangra to celebrate victory. They didn’t take their eyes off the ball. Sceptical of the Prime Minister’s announcement they kept the pressure to ensure that Parliament did indeed repeal the three laws. Simultaneously, they seem to have raised the ask to a legislated minimum support price for farm produce.

Farmers’ perception regarding their future well-being is obviously linked to the outcome of their agitation. A repeal of the laws was therefore expected to lift their sentiments unless they had discounted success even before the Prime Minister gave in. The absence of overt jubilation is worth pondering.

The mixed response to the rolling back of the laws warrants a quantitative estimation of the effect of the announcement. Change in the Index of Consumer Sentiments for rural India is a good candidate for such a measurement. Repealing the new farm laws would impact farmers and their eco-system of middle-men and other participants of the status quo. The impact is therefore best seen in the sentiments of rural India against urban India.
 

The Index of Consumer Sentiments has two component indices – the index of current economic conditions and the index of consumer expectations. The former is derived from responses to two questions – how are household incomes today compared to a year ago and what is the propensity of households to buy non-essentials. The index of consumer expectations is derived from three questions – how do households expect their incomes to perform a year later, how do they expect business conditions to perform in the next year and how do they expect business conditions to perform over the next five years.

Besides the outcome of the agitation against the farm laws, the well-being of farmers is also determined by performance of the current year’s crops. We know that the kharif crop has been good and the rabi crop is also shaping up well. Prices have been largely buoyant. A good crop and the removal of a law the farmers did not like should have propped up consumer sentiments. But, it did not.

Results for the week ended November 28 show that rural India was not particularly impressed with the announcement. The index of consumer sentiments for rural India inched up by a meagre 0.3 per cent in the week, which was the first full week after the announcement. This is much better than the 4 per cent fall in the urban index of consumer sentiments. But, it is lower than the 1.7 per cent gain made by the rural index of consumer sentiments in the previous week which ended on November 21, just two days after the PM’s announcement. And, both these gains were much lower than the 6.3 per cent gain made in the earlier week and the 4.3 per gain before that. The rural index of consumer sentiments was performing much better two weeks before the announcement than it did in the two weeks that ended after the announcement.

In the last two weeks of November, rural India has expressed pessimism on the current economic conditions. The proportion of households that stated that their incomes were higher than a year ago fell from 14 per cent in the week ended November 14 to 13 per cent in the week ended November 21 to a much lower 8.4 per cent in the week ended November 28. The proportion of households who stated that their incomes were the same as a year ago increased from 48-50 per cent in the preceding three weeks to 55 per cent in the week ended November 28.

Significantly, the jump in proportion of households who considered the current times to be better to buy non-essentials fell from 10 per cent in the week ended November 21 to 7 per cent in the week ended November 28.

Nevertheless, rural households did improve their perceptions regarding the future. The rural index of consumer expectations rose 3.2 per cent in the week ended November 21 and then by another 1.3 per cent in the week ended November 28. But, neither of these growth rates were better than the 5-8 per cent growth seen in the first two weeks of the month.

This significantly subdued growth in expectations and the fall in perceptions regarding current economic conditions in rural India summarises the farmers response to the PM’s announcement. This is not the view of just a few farmers or any farmers’ organisations. This is the collective view of thousands of responding households from rural India.

The index of consumer sentiments in rural India is doing better than in urban India. But, this was true even before the Prime Minister made the dramatic statement to repeal the proposed laws. What is pertinent is that the announcement to repeal the laws did not make any material difference in improving rural consumer sentiments.

The writer is MD & CEO, CMIE P Ltd