Rural distress is well and truly entrenched and multiple data points suggest as much.
Reserve Bank of India’s Monetary Policy Committee (MPC) used the dreaded deflation word 11 times, while talking about food prices, at its meeting last month.
MPC members observed that “five constituents of the food group – vegetables, sugar, pulses, eggs and fruits, accounting for about 30 percent of food group – were in deflation in December.” It added that “inflation in respect of other major food sub-groups – cereals, milk, and oils and fats – was subdued. Within cereals, rice prices declined for the fourth consecutive month in December.”
What the MPC suggests is that prices of food items have either fallen sharply or have not grown at all in months. And this has not been a one-off; the deflationary tendency has persisted over a period of time, adversely impacting the income of scores of farmers.
Since price movement is very crucial input to monetary policy formulation, RBI’s word is considered final in this regard. And MPC members would have taken extra care before using the scary deflation word.
No wonder, The Indian Express reports that farm income growth, at 2.04 percent in nominal terms in the quarter gone by, is lowest in 14 years! Growth in nominal terms, that excludes impact of inflation, is considered a better indicator of movement in farm gate prices or the prices farmers receive for their produce.
Subdued nominal income growth means farmers aren’t able to recover cost of production, let alone make any profit. And that is quite a disconcerting piece of information for a majority of rural households.
If you add extremely muted growth in rural wages – just 2.07 percent in December – you have a picture of full-blown crisis in the countryside. Farmers are losing money on their produce, wages are flat and non-farm jobs are tough to get.
When you get such a combination, you know that incumbents’ re-election chances diminish considerably. And we have three recent examples of rural distress/prosperity decisively altering the outcome of Lok Sabha elections.
Rural Distress Proved to Be Vajpayee’s Nemesis
Despite the hype around India projected to be Shining before the 2004 Lok Sabha elections, we know that the countryside was in the middle of a crisis.
According to a paper by Ramesh Chand, now a member of the Niti Aayog, farm income in nominal terms grew at an average annual rate of 7 percent (less than 2 percent in real terms) between 1993-94 to 2004-05.
While the growth was healthy in the decade preceding 2004, it was particularly bad in the last five years. What is worse, rural wages in nominal terms fell in March 2003 and remained flat till July 2005.
An RBI report says that “from January 2002 to September 2007, when the average growth in rural nominal wages remained around 4 percent, while the average rural inflation stayed around 4.5 percent. As a result, there were extended spells when growth in real wages stayed in the negative territory.”
We know what happened thereafter. The charismatic Atal Bihari Vajpayee surprisingly lost the elections and reverses suffered in the rural constituencies proved to be his undoing.
The United Progressive Alliance government led by Manmohan Singh was perhaps mindful of the ongoing rural distress.
Through a series of measures – rural employment guarantee scheme and substantial hike in minimum support price being the two important ones – the then government tried to boost rural income.
Farm income, as a result, grew at a brisk pace and rural wages recorded unprecedented growth. Farm income in nominal terms grew at an impressive annual rate of 17 percent between 2004-05 and 2011-12. Rural wages, too, grew at an average annual rate of 17 percent! Even after adjusting for inflation, rural wages grew at a healthy average annual rate of 7 percent.
UPA-II Ignored Rural Areas and Paid a Heavy Price
Rural prosperity ensured a second term for Manmohan Singh, a first for an incumbent after Jawaharlal Nehru.
However, towards the end of his second term, farmers’ income growth collapsed and rural wage growth turned flat. Ramesh Chand writes that “the average growth in value added or GDP agriculture during the three years after 2011-12 drops to 1.93 percent, which is less than half the growth rate achieved from 2004-05 to 2011-12.”
He adds that “real farm income would have increased by about 1 percent per year post 2011-12. This growth rate is just one-fifth of the growth rate in farm income from 2004-05 to 2011-12. Surely, such a low growth in farm income is a strong factor responsible for the increase in distress among farmers.”
And the rural distress proved to be a decisive factor in the Lok Sabha elections that followed. The Congress came crashing down to its lowest ever tally in 2014.
The BJP won 178 of the 342 rural Lok Sabha seats and the party’s vote share in the countryside jumped from 17 percent to more than 30 percent. For a party known to have pockets of influence confined to urban centres alone, that was quite a feat. What hurt the Congress the most was sharp slowdown in rural areas after seven consecutive years of accelerated gains.
Is the BJP’s re-election bid likely to overcome the rural distress roadblock? Historical data suggests that that is a tough ask.
In the recent Assembly elections in Gujarat, Madhya Pradesh, Rajasthan and Chhattisgarh, we have seen the BJP’s support base shrinking considerably in rural seats.
A complete trend reversal is unlikely to happen in the Lok Sabha elections, notwithstanding the positive impact of targeted rural schemes like Ujjwala and the recent minimum transfer scheme. The countryside is going through a period of full-blown crisis. Tokenism is unlikely to win many hearts and minds.
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