A calibrated approach to rural distress is the way forward and not mindless populism

A pared down vote bank on home turf should not inhibit Prime Minister Narendra Modi from focussing on economic reforms that have been hallmark of his government. Modi and finance minister Arun Jaitley have earlier justified the short-term pain of demonetisation and GST roll out as being necessary for long-term gain. The momentum of the reforms process will have to continue even though the BJP lost in several pockets of Gujarat to the opposition Congress. Given that Hindutva does not remain its sole preserve and that the Congress has arrived with its own version of ‘soft Hindutva’, the BJP-led NDA will have to make a difference through governance and reforms that will improve the quality of life, especially in rural India. Embracing mindless populism and frittering away the India growth story is not an option if this agenda is to be pursued. Given that prime minister Modi has to lead the party to several rounds of legislative assembly elections over the next year followed by the Lok Sabha polls, the temptation to opt for doles will have to be resisted come what may.

This will be the last full budget to be presented by the Modi government. When finance minister Arun Jaitley rises to present his budget proposals on February 1, 2018, the insatiate urge to go populist will have to be reined-in. The prime minister’s willingness to absorb the political fallout from the government’s reforms push ought to continue through the remainder of the term. The reforms focus with inclusive development agenda cannot be lost given that Modi himself raised slogans of vikas after the victory speech at the BJP headquarters on Monday. Development with both medium and long-term goals cannot be traded for populist dole outs that may bring in a few lakh votes in the next round of assembly and Lok Sabha polls.

Restructuring the rural economy with focus on taking the fruits of reforms to people down the line must be attempted. Only then, will the reforms agenda become politically saleable. Following the results of the Gujarat and Himachal Pradesh elections, Jaitley had hinted at tackling farm distress that largely contributed to the BJP’s rout in Saurastra. If that means loan waivers or increasing the minimum support price on some farm products, that may not provide the intended relief to distressed farmers. Even as a short-term measure, farm loan waivers have been inadequate and ineffective.

Andhra Pradesh has not been able to waive farm loans fully as promised. Maharashtra, Rajasthan and Madhya Pradesh are grappling with the issue of farm loan waivers owing to inadequate resources. Karnataka is no exception to non-availability of funds to finance loan waivers. Even if loans are waived, the real beneficiaries are likely to be large landholders and not small farmers. Hence, Modi’s team will have to come up with a counter-offensive to remove the feeling of helplessness in several parts of rural India. Market discovery of prices for farm produce must be allowed to happen rather than forcing farmers to make sacrifices for keeping the middle class voters happy. Phasing out middlemen in the agriculture value chain will be a big challenge for the Modi government. The National Agriculture Market or NAM — an online platform — to bring consumers and producers at one place like equity markets has not realised its full potential owing to glitches. Even in states where NAM has been effective, only middlemen and brokers have been trading on behalf of farmers, taking huge commissions for themselves.

Apart from breathing life into NAM by facilitating farm trade at minimum cost, the government will have to find ways and means to increase the earnings of farmers by supporting them with cost-effective finance, implements, quality seeds, extension services and assured returns on their meagre investments. If power companies can be allowed assured 18 per cent returns why can farmers not be assured of profits for their produce after toiling all year long? A calibrated approach to rural distress is the correct way forward and not mindless populism.