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| 'Shining'
in Rural India |
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Probably
the most interesting feature of the forthcoming elections
is that the ruling coalition has decided to contest
them less on basis of new promises or vision for the
future and much more on the claim that things have never
been better. Whether in the jingles of 'India Shining'
or 'Bharat Uday' or in their more partisan claim of
'more in the last six years than in the past fifty',
the stance is confident and borders on the audacious.
If the NDA does win absolute majority as opinion polls
predict, it will not only claim endorsement for its
policies but also popular approval of the trajectory
that the nation's polity and economy have actually taken
since 1996 when the Congress last ruled or at least
since 1998 when the NDA finally came to power.
The opposition has of course attempted to refute these
claims. The outrage in Gujarat, the continuing threats
to minorities by various factions of the Sangh parivar
and the misuse of POTA were all highlighted in the political
effort to form a secular front to restore communal and
social harmony. But this effort has succeeded only partially.
Since the ruling alliance has posed the choice as one
of personality, with the current prime minister projected
as both moderate and with a vision on development, it
is the credibility of NDA claims about the economy that
may well be the deciding factor.
On this some political parties, e.g. the left, have
a clear position. And, to her credit, Sonia Gandhi has
concentrated on unemployment and the plight of farmers
in her election speeches. But many others in the Congress
sing a different tune. By claiming the present to be
consequence of economic policies that the Congress initiated
in 1991 but which the BJP 'stole', they provide credence
to claims of 'shining' and simultaneously indicate that
the trajectory is unlikely to change whatever the election
outcome. Along with media hype, whether on cricket,
on persons entering politics, or on quarterly GDP figures,
such implicit acceptance of 'feel good' is far more
effective in spreading the government message than those
expensive advertisements that have now stopped.
The first point to note, therefore, is that there is
a vocal constituency that does believe that the economy
is doing well. More importantly, this cuts across most
party lines and involves belief that the 'reforms' of
1991 served them well. The BJP not only wants to appropriate
ownership of this with its 'shining' campaign but also
imbue it with the celebration and aggressiveness that
had succeeded on Hindutva. Implicit in this is that
just as with Hindutva, there are inhibitions in this
constituency which if turned from apology to assertion
can cut the ground from the feet of the Congress. Having
gone from opposing economic 'reforms' of the Congress
in the last elections to taking it on wholesale in office,
the strategy clearly is to take the winners on board
triumphantly while leaving the opposition struggling
to recapture those who lost.
The second point which follows from the above is that
benefits of 'reform' have been uneven. This is, of course,
quite well known to laypeople as also to politicians
who need to judge pros and cons before taking definite
positions. However, politicians seek guidance on economic
magnitudes just as they do psephological help. And 'reform'
ideologues among economists, whether in media, business,
academia or government, have always nudged policy judgement
by employing spin to discount the downside and magnify
gains. Moreover, since almost all of them believe in
'reform' to the point of being insensitive to its outcome,
their barrage has been remarkably consistent on economics
although fickle on politics.
This means that, although more confident and aggressive
in presentation, the NDA's 'shining' campaign is built
on economic inputs no different from those which were
received by Congress and United Front when they contested
unsuccessfully to retain office. If anything, the main
lesson that 'reform' enthusiasts seem to have learnt
from those defeats was that the data available should
not demoralise decision-makers on matters that might
be politically sensitive.
For example, with yield growth slowing down sharply,
there was clear evidence from available data that all
was not well with agriculture when the Congress and
UF had gone to polls. Also, the National Sample Survey
(NSS) had shown higher rural poverty in all its nine
rounds from 1990-91 to 1998 than in 1989-90. But ingenious
'reformers' had sorted out such inconvenient detail
by 1999. National Accounts Statistics (NAS) of 1998
had shown GDP growth in agriculture down from 3.5% per
annum during the 1980s to only 2.8% during 1990-91 to
1996-97. But in 1999 a new National Accounts series
was released showing 1990-97 growth of agricultural
GDP to be 3.6% per annum. The 53rd round of the NSS
conducted in 1997 had shown 35.5% of rural people in
poverty, up from 33.7% in 1989-90. But the NSS round
conducted in 1999-00 came up with only 27.1% rural poverty.
From almost the beginning of their term of office, it
has been dinned into NDA ministers that things have
really been rather good on such matters after 'reforms',
and certainly not as bad as they might have thought
while in opposition. 'Shining' is thus as much an outcome
of the skill of 'reformers' to package facts attractively
as it is of BJP audacity. A resulting problem though
is that no one really knows the extent of 'feel good'
and, even more, that NDA leaders may be going to polls
actually believing such official statistics. Since agricultural
production and the extent of rural poverty are among
the most basic determinants of rural 'feel good', it
is worth discussing the nature of available data on
these, beginning with agricultural production consisting
of crops and livestock.
Data on area and yield of 43 'forecast' crops are collected
annually on a scientific basis and are used to compile
the official Index of Agricultural Production (IAP).
Firm livestock data are available only every five years
from the Livestock Census and annual estimates of livestock
products are based on interpolations from these using
various ratios and assumptions regarding produce per
animal. But virtually no reliable data is collected
on actual production of many minor crops, including
most fruits and vegetables. For these, production estimates
are carried forward from some assumed base using information
on area, seed distribution and arrivals in major markets.
Farm income estimates require further assumptions regarding
inputs, price spreads and losses between the farmer
and final markets.
The data revisions on agricultural GDP in 1999 involved
fruits and vegetables. Till then, although production
of these was estimated to have grown faster than other
crops, their small estimated share of only 11-15% of
total crop production meant that there was no significant
difference between the trend of agricultural GDP and
that of IAP, based on firm production data. However,
taking advantage of some concern that fruits and vegetables
production was being underestimated, the 'reformers'
persuaded the NAS to revise estimates very sharply upward
– almost double for 1996-97. Also, since then
fruits and vegetables production has been shown growing
at about 4.5% per annum.
The implication of this revision, carried out with no
reliable data at all, has been rather dramatic on how
agricultural incomes and Indian diets are now viewed
officially. Till the revision, the value of fruits and
vegetables output was assumed to be only a third of
that from foodgrains production. But latest GDP estimates
imply that, although grown on less than a sixth of the
area, fruits and vegetables now account for about the
same farm revenue as foodgrains. Further, the National
Accounts Statistics (NAS) also imply that farmers receive
about 70% of total consumer spending, i.e. traders'
margins, losses in transit and costs of transport on
fruits and vegetables all add up to only 30% of what
consumers pay.
If all this were true, growing fruits and vegetables
now fetches well over an average of lakh rupees per
hectare, and things must indeed be shining for growers.
In fact, based on such understanding, the official effort
today is more on exhorting farmers to diversify than
to restore yield growth in crops such as cereals, pulses,
oil-seeds and fibres. However, although it is true that
some horticulturists are doing rather well, NDA campaigners
might be advised not to make too much of this. Not only
do farmers know how much they grow and exactly what
price they get, Indian consumers might be shocked to
learn that the NAS now assumes that they spend three
times as much on fruits and vegetables as they themselves
report to NSS consumption surveys.
But what should really worry the NDA is that despite
the creative national accounting, GDP from agriculture
and allied activities has hardly grown during its period
in office. At 1993-94 prices, latest NAS estimates place
this at Rs 2861 billion in 1998-99, 2870 billion in
1999-00, 2859 billion in 2000-01, 3053 billion in 2001-02,
2894 billion in 2002-03 and 3158 billion in 2003-04.
The 9% growth in the current year is impressive. But
this is from last year's drought, and growth over the
five years is only 10.4%. Since population has meanwhile
increased by over 9%, per capita agricultural GDP this
year is placed not even 2% higher than in 1998-99.
And, of course, matters are much worse considering only
those crops whose data is firm. Although current estimates
of foodgrain production for 2003-04 are a whopping 19%
higher than in 2002-03, this is only 4% higher than
in 1998-99; and the overall Index of Agricultural Production
(IAP) has increased less than 3% between 1998-99 and
2003-04. The IAP per capita of rural population is thus
actually down 6% from 1998-99 while per capita foodgrains
output is down 5%.
Moreover, this is not all. The feature that distinguishes
the last five years, and worries farmers most, is that
farm prices have drifted relatively lower despite low
output growth. With agricultural GDP at current prices
shown 27.3% higher in 2003-04 than in 1998-99 against
10.4% increase at constant prices, agricultural prices
increased 15.4%. But during the same period, non-agricultural
GDP is estimated to have increased 39.2% in constant
prices and 69.1% in current prices, implying 21.5% increase
in non-agricultural prices. The GDP estimates imply
at least 5% terms of trade loss for agriculture over
1998-2004.
Again, matters might be worse since official terms of
trade indices from the Ministry of Agriculture had already
shown 5% decline during 1998-2002, when terms of trade
from GDP estimates had shown only 2% decline. But in
any case, taking terms of trade into account, the purchasing
power of agricultural incomes has actually declined
in per capita terms during 1998-2004 even by the optimistic
NAS figures; and this decline is by more than 10% if
one combines official Indices of Agricultural Production
and Terms of Trade. Thus, despite some diversification,
overall agricultural outcomes have been poor, both on
output and prices.
As far as output is concerned, this is because rates
of growth of yields per acre have declined very sharply
for almost all major crops. Considering all the crops
covered in the IAP, yield growth had averaged 2.5% per
annum during the 1980s, dropped to around 1.5% by 1998-99,
and has averaged only about 0.5% during the last five
years. Underlying this are some long-term trends, e.g.
the plateau reached by 'green revolution' technology
and inadequate public investment since the 1980s. But
matters have worsened recently on these and other fronts,
such as extension and cooperative credit, because the
Fifth Pay Commission bankrupted state governments.
Of course, some states have done better than others
on output growth and the private sector has begun extension
activities for some crops in some regions. But, with
very few winners and many losers, agricultural production
performance is not an aspect in which India is shining.
However, the political fallout is not entirely clear
since, with most states opposition ruled, the blame-game
will be about Centre-state responsibility and response.
And the debate is likely to be on whose incumbency hurt
more, not what is to be done in the future.
On the price situation, however, the NDA is much more
vulnerable. After all, it was the Centre that caved
in at WTO and dismantled quotas prematurely, exposing
Indian agriculture to the international price volatility
that many farmers blame for their woes. And, although
attractive support prices were announced, farmers in
most regions did not actually get any price support.
Moreover, contrary to recommendations of some committees
to extend support operations, there are plans to halt
support purchases altogether and link support prices
to insurance – a misguided alternative already
being piloted in some districts where Rabi arrivals
will coincide with elections.
Turning to rural poverty, can this have reduced given
the poor agricultural outcomes? Also, given the near
vacuum on policy initiatives on agricultural production
and price instability, what are the ideas to deal with
this? The important aspect that needs noting in this
context is that rural incomes are not all from agriculture
and that fall in crop prices, although this hurts farmers,
can improve conditions for those who buy food. |
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The
'shining' campaign has put particular emphasis on
the achievement on roads and thus of rural connectivity.
And available NSS data does show fairly massive rebound
(by over 40%) in rural non-agricultural employment,
particularly construction, transport and trade, during
1997 to 2001-02, after a collapse during 1990-91 to
1997. Moreover, available data on wages and prices
show that the consumer price index for rural labour
increased less than other price indices after 1998-99
and that real wage rates have increased. Further,
rural non-food consumption is increasing whether one
goes by NSS or independent data. Thus, there are clear
signs of rural dynamism if one goes beyond agriculture.
However, paralleling the poor agricultural performance,
there is also evidence of stagnation in agricultural
employment while the number of rural workers dependent
on wage employment has increased very sharply (over
45% since 1991). NSS data in fact show a doubling
of current unemployment among usual rural workers
over the period 1997 to 2001-02. Furthermore, although
the 'shining' campaign has correctly identified the
fairly large antyodaya grain supplies as a major achievement
of the NDA, overall per capita cereals consumption
(whether measured by availability or from NSS consumption
estimates) has declined.
This coexistence of some dynamism in rural non-agriculture
alongside declining agriculture makes it difficult
to identify exactly what is happening to overall rural
well-being. This is compounded because the only reliable
source of information on this, the NSS consumption
expenditure surveys, have become non-comparable. Pressure
from 'reformers', stung by NSS results that showed
increased rural poverty from 1990-91 to 1998, caused
a change in the nature of the questions asked in these
surveys.
Some experimental surveys had shown that asking 365
day, rather than 30 day, questions on items such as
clothing and durable goods throws up improved distribution
and that asking 7 day questions on food returns 30%
higher food consumption than 30 day questions. So,
instead of the uniform 30 day recall used previously,
the 1999-00 NSS questionnaire was changed to only
365 day for clothing and so on and both 7 and 30 day
questions for food. Not surprisingly, this led to
much lower measured rural poverty, by almost 50 million.
Since then much has been written on comparability
of subsequent NSS data, and it is sufficient to note
that it is now agreed that rural poverty did not decrease
by anything like 50 million and that, although the
proportion of poor is likely to have declined somewhat,
the number of poor may actually have gone up. More
importantly, it is now agreed that, properly interpreted,
NSS data from 1993-94 onward show very large increase
in inequalities (see chart) – across states,
between rural and urban, and within urban areas. Moreover,
although evidence on inequalities within rural areas
is less clear, the trend towards lesser inequality
that had begun in the mid-1970s with rural development
programmes and extended public distribution has clearly
halted.
But, consistent with the divergent indications on
agriculture and rural non-agriculture discussed above,
the most interesting indication from NSS data from
1993-94 to 2001-02 is that although cultivators and
agricultural labourers have done badly, and the self-employed
in non-agriculture have also not done well, those
employed for wages or salary in non-agriculture have
done much better. In fact, salaried employment, proximity
to urban growth, and the ability to migrate emerge
as main determinants, not only of the ability to avoid
poverty but also as sources of relative affluence.
Although cultivators still dominate among the richest
20% in rural areas, the proportion among the rural
rich of affluent non-cultivators with urban connections
has increased rapidly.
This should interest those attempting to guess political
outcomes. Although caste and religion continue to
dominate networks of patronage, the combination of
poor agricultural outcomes and rapid urban growth
in recent years has shifted the rural balance from
traditional elites towards those who can offer urban
access. It is here that the BJP, traditionally much
weaker in rural than urban areas, can be the biggest
gainer. Rural India is definitely not 'shining'. But
access to the shine that exists, which the 'shining'
campaign has made even more apparent, is now through
networks where that party is stronger. The moot question
is whether this shift in balance merely affects how
people tell outsiders how they will vote or whether
this is so deep that it will actually show up in how
they finally vote?
On this, NDA strategists might like to mull over the
following about rural India. It remains overwhelmingly
agricultural, is about to go into elections in a year
after severe drought, and is being bombarded with
celebrations of 'shining' without any solution being
offered for what is definitely a longer-run crisis.
There have in the past been only four years before
the current one when national income has grown more
than 8%: 1967-68, 1975-76, 1988-89 and 1996-97. These
have all followed a year of drought and all except
1975-76, when Indira Gandhi declared an Emergency,
were election years. The ruling party suffered losses
every time.
May 7, 2004.
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