Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op-ed snap] A look at how the poorest fared under the present government


Mains Paper 3: Agriculture | Transport & marketing of agricultural produce & issues & related constraints

From UPSC perspective, the following things are important:

Prelims level: APMC Act, Economic survey

Mains level: Rural distress and ways to resolve it


Data Paradox on Rural distress-

  1. The data on wages/incomes of manual casual workers clearly suggests that not only have they seen a secular deceleration in growth rates of wages since this government took over, but also that there does not appear to be any sign of these improving, despite the signs of recovery suggested by the aggregate gross domestic product (GDP) numbers.
  2. The data on wages from the Labour Bureau based on the Wage Rates In Rural India series, it provides wage data for various occupations, it is safe to assume that general agriculture labour and general non-agricultural labour occupational groups are representative of the two categories of casual workers.

Real wage growth of various categories of rural workers since 2014

  1. Since May 2014, real wages of agricultural labourers have grown at the rate of 0.77% per annum until October 2018, whereas it has grown only at 0.02% per annum for non-agricultural labourers.
  2. For construction workers, who form among the largest group of workers outside agriculture, real wages during the same period has declined by 0.24% per annum.
  3. For all agricultural occupations together, the growth rate of real wages during this period is 0.55% per annum.
  4. Since November 2016, real wages of casual workers are almost stagnant with almost no growth.
  5. It is important to note that the current spell of stagnation in real wages is the longest and the worst in the past three decades.
  6. Clearly, the crisis in the countryside is not just for the farmers who cultivate but also for wage workers who depend on availability of jobs in agriculture and outside agriculture.

Why does rural India continue to witness stagnant and declining real wages?

  1. Primarily because the agrarian economy, which drives the rural economy, has been under severe stress.
  2. Declining crop prices continue to remain a worry for agricultural income, with wholesale and retail prices for most crops showing a declining trend in the past five months.
  3. Even non-food crops have gone through a price collapse.
  4. Non-agricultural sector of the rural economy is doing worse than the agricultural economy.
  5. A large part of it is also because of the after-effects of demonetization and goods and services tax, which continue to affect the rural non-farm economy.

Contrary to the rosy picture

  1. The trends in wage growth are clearly contrary to the rosy picture of a recovering and buoyant economy projected by the government and suggests a far more serious crisis in rural areas than reflected by the agrarian crisis.
  2. For instance, Farmers from different parts of the country are knocking at the doors of Parliament in Delhi.

How to reconcile two diverging trends?

  1. While it is possible that wages continue to decline as overall growth rates continue to rise, it does imply that the growth rate is not inclusive and has bypassed the poorest sections.
  2. It certainly points towards a trend of increasing impoverishment and rising inequality, both of which are not good for the economy.
  3. However, it is also a strong indicator that the underlying factors, which caused demand deflation in rural areas leading to rural distress, continue to remain strong and relevant.

Way Forward

  1. Clearly, there is very little to suggest that either the growth has benefited the rural economy or that recent growth has reduced the extent of rural distress.
  2. This is not just a statistical issue, but is at the core of the promises made by this government to bring in improvements in the lives and livelihoods of the poorest.
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