 "Improbable plans in a pro-farmer Budget")
The several pro-farmer announcements made by Finance Minister Arun Jaitley in his Budget speech have been hailed as good politics as well as sound economics - addressing rural distress could stimulate manufacturing in the country.
But what analysts fail to digest is Jaitley's promise to double farm incomes in five years, a point Prime Minister Narendra Modi had made at a rally at Bareilly last week.
Farmers' income in itself is a contentious issue, given that calculating it has been tricky so far, which has made the task of arriving at a uniform nationwide income slab all the more difficult.
Some experts say this is easy as farmers' income can be calculated from the Central Statistical Organisation data on rural income or derived from the cost of cultivation data prepared by the Commission for Agriculture Costs and Prices.
It is the doubling part that is difficult and open to criticism. "Statistically speaking, roughly doubling farmers' income means that agriculture and allied activities need to grow at a compounded annual rate of 15-18 per cent over the next few years, while the maximum growth achieved so far has been not more than 6-7 per cent," says Yogendra Alagh, former union minister for planning and programme implementation.
Others too have expressed disbelief at this tall order.
But the Centre does have a plan: it feels farmers' income can be doubled in the next five years by lowering their costs of production and a calibrated increase in the Minimum Support Price (MSP).
It believes costs can be brought down by making cheap water available through better irrigation facilities, judicious use of fertilisers and chemicals, better marketing facilities.
The government believes that all these intangibles would combine to lower the cost of production for an average farmer, and improve his earnings, which together would lead to the doubling of his income by 2022.
A crucial part of the plan will be the MSP. The Bharatiya Janata Party in its 2014 election campaign had promised an MSP that is 50 per cent over the cost of production.
The suggestion was not altogether original: it was first mooted by the National Farmers' Commission under the chairmanship of noted agriculture scientist M S Swaminathan during UPA-1, but was never implemented in its 10-year rule.
BJP in its 2014 poll manifesto promised to implement the same, but failed to fulfil the promise after it came to power. For instance, the average increase in MSP of cereals has been less than 10 per cent per annum so far.
In fact, the agriculture ministry in a report tabled in Parliament in April 2015 rejected a 50 per cent increase on the grounds that such a mechanical calculation might distort the market and prove counter-productive by encouraging inefficient production.
It would also go against the principle of comparative advantage in producing specific crops.
"Fixing an MSP on cost plus basis would discourage efficiency in the agriculture sector and negate our efforts to bring down the cost of cultivation," the farm ministry had said.
However, two consecutive years of drought and a general fall in farm-gate prices leading to an overall scenario of rural distress has re-ignited the demand, and Modi and Jaitley have started to see wisdom in it.
Still, it will take a leap of faith to bring about such a sharp increase in MSP. A look at what has happened in the recent past shows that it will be tough for the government to raise MSP so dramatically.
Implementation is key
According to a statement tabled in Parliament in the last winter session, the all-India weighted average cost of production of arhar (tur) from 2012-13 to 2015-16 increased by around 17.07 per cent, but the corresponding MSP during the period went up only 14.93 per cent.
The data also showed that the weighted average cost of production of moong increased 16.41 per cent between 2012-13 and 2015-16, while the corresponding increase in MSP during the period was around 5.68 per cent.
The weighted average cost includes all paid out cost, plus imputed value of family labour as calculated by the Commission for Agriculture Costs and Prices.
Interestingly, the same data set shows that from 2012-13 to 2015-16, the all-India weighted average cost of production of wheat increased by 9.63 per cent, while MSP surged by a hefty 12.96 per cent during the same period.
This is why doubling the income by 2022 without a sharp increase in MSPs or a quantum jump in the value of production looks improbable.
"The assumption that incomes can be doubled by lowering the cost of production through inputs like irrigation looks slightly unrealistic given that irrigation is just one of the inputs that go into producing a crop," says Sudhir Panwar, member of the Uttar Pradesh Planning Commission and president of Kisan Jagriti Manch. "I mean, in agriculture you can't raise income based on just one input."
Farm incomes can be only doubled if the farmers get a good value for their produce, which this government has failed to guarantee so far, Panwar adds.
According to Alagh, even if such growth is somehow achieved, it will lead to a situation where the supply would be in excess of demand and thereby lead to a glut in the market.
Alagh feels that one way to absorb this huge agriculture supply would be to become a major player in the global market, elbowing out traditional powerhouses like New Zealand and Australia.
"But this has its own limitations as there are a number of WTO-imposed restrictions, while India's ability to subsidise exports is limited," says Alagh.
