Prime Minister Modi’s Clay Feet Has A Name: Rural Distress

Rural India limited the Bharatiya Janata Party to 240 seats in the Lok Sabha. And but for the “NDA allies”, Narendra Modi wouldn’t have become Prime Minister for a third time. The BJP now depends on its partners for the simple majority in Parliament. The BJP lost a third of its rural parliamentary constituencies in 2024, reflecting acute rural distress. MSP, Agniveer and high unemployment, all of these contributed to the BJP’s post-poll distress.

The BJP retained only 126 of the 251 rural seats it held in the 17th Lok Sabha. But the BJP-led National Democratic Alliance (NDA) won 221 rural and semi-rural Lok Sabha constituencies. Most of these seats came from Uttar Pradesh, Haryana and Rajasthan. Compare this with 251 rural and semi-rural constituencies in 2019. The INDIA bloc, on the other hand, won 157 rural and semi-rural constituencies in the 2024 election.

The newly-installed NDA government should immediately address issues related to rural distress. The farming community is in such dire straits that it cannot wait for relief. Prime Minister Narendra Modi has made a big show of his government’s commitment to farmers by releasing the payment for the next quarter PM Kisan Samman Nidhi. But there is nothing special about this direct to bank transfer. The 17th instalment should have been paid in late April, but wasn’t because of the Model Code of Conduct in place.

And throughout the course of the election campaign, there was simmering rural discontent. Farmers weren’t getting remunerative agricultural prices, there was high rural unemployment, there was a decade-long wage stagnation and rising food prices. The common masses including lakhs of farmers suffered. Naturally, the Modi government was blamed and it paid dearly in the recent elections.

In the last decade and a half, rural distress has increased. The cost of production in agriculture had gone up nearly three times fuelled by high prices of fertilizers, seeds, diesel and pesticides. All of these are essentials for the agrarian economy. Though the government has been periodically announcing MSP for various crops, farmers continue to be in distress, unable to sell their harvested produce in markets.

In economic terms, there are two types of incomes. One nominal and the other real. While nominal incomes (in currency terms) saw a small rise with MSPs, “real” incomes were falling. Real income is tied to purchasing power (Consumer Price Index) of consumed food and household industrial goods. As per estimates, real income has decreased by 60 percent in the last 15 years, chiefly due to the price disparity between agricultural and industrial commodities in the markets.

This price imbalance has resulted in the transfer of nearly Rs 28 lakh crore of the total estimated Rs 42 Lakh crore worth of total farm produce in the country. For every rupee purchase of agricultural goods by a consumer in the super markets, a farmer receives only 26 to 30 paisa. The surplus is pocketed by grain merchants, millers and corporate houses. The “real income” that the farmers get is unable to sustain families leading to rural distress. The dismal performance of the farm sector is reflected in the slowdown in average agriculture growth. The Modi government’s promise to double farmer incomes was only talk.

Rural distress has not been receiving adequate attention from policymakers. Instead of providing employment and succour to rural families, the Union government had cut budget allocations to pay for subsidies for various government schemes. Example, subsidy allocation for MGNREGA has been coming down consistently in the last 2-3 years. Demand for work under the MGNREGA rose 48.8 percent in April.

There is a continued rise in unemployment, going up to 30.2 million people seeking jobs, according to data from the Ministry of Rural Development. The demand for work under MGNREGA increased sharply by 48.8 percent in April, says NCAER data. The government might have not spent on the subsidies for MNREGA while tax flows, especially GST, have been highly robust.

While India’s provisional GDP grew 8.2 percent in FY24, thanks to the manufacturing and mining sectors. However, the share in GDP and the Gross value added (GVA) has come down to 1.4 percent in FY24. Average agriculture growth is usually at 3 percent. In 2023-24 it was only 1.4 percent. This was coupled with high food inflation. In February-April, average food inflation was at 8.6 percent. The decline in consumption and in rural demand was visible not only in the fall of household items but also in the fall in sales of tractors and motorcycles in rural markets.

Instead of resorting to superficial measures, Modi’s NDA government should take immediate measures to curtail rural distress: Issue a one-time farm loan waiver; calculate crop MSPs as per the recommendations of M S Swaminathan Commission, bring a law to ensure legal guarantee of MSP for all crops. Nearly 130 million rural poor are deprived of cheap ration under PDS and sections of the poor, including migrant workers, are invisible. Remove GST on the purchase of farm inputs including fertilizers, and farm equipment. Construct grain and cold storage godowns in all taluk headquarters. Pay crop insurance compensation straight into farmers’ bank accounts within 30 days of crop damage. Entrust crop insurance exclusively to public sector insurance firms. Scrap Agniveer and double the funds for MNREGA. Repair local irrigation and drainage channels, build rural hospitals, schools and roads. (IPA Service)