Agriculture

Gujarat Elections: In 2018 and 2019, with More Socialism, Modi Will Become More Like Manmohan

narendra_modi

As expected the Bhartiya Janata Party (BJP), won the state assembly elections in Gujarat. The margin of victory though left much to be desired.

Before the elections, the party president Amit Shah had talked about the party winning 150 out of the 182 seats in the state assembly. The party finally ended up with 99. So, there was a clear gap between expectation and reality. I say this because Amit Shah is a brilliant electoral strategist and his words should never be taken lightly.

Finally, it is the massive support that the BJP enjoys in the cities of Gujarat that pushed it through. In the four biggest cities of Gujarat, Ahmedabad, Surat, Vadodara and Rajkot, the party won 46 out of the 55 seats (Ahmedabad 16 out of 21 seats, Surat 15 out of 16 seats, Vadodara nine out of 10 seats and Rajkot six out of eight seats).

What this clearly tells us is that the Goods and Services Tax (GST) wasn’t as big an issue in the cities of Gujarat, as was made out to be in the days leading up to the elections, in the media. It clearly impacted a section of the population, but that wasn’t large enough to make an electoral difference. The only other explanation for this lies in the fact that even those impacted negatively by the GST, couldn’t get themselves to vote for the Congress.

The other interesting point here was that more than 5.5 lakh voters chose the NOTA (none of the above) option while voting. This amounted to 1.8 per cent of the total eligible votes. The NOTA votes were more than or close to the winning margins in nearly 24 constituencies. One explanation for this that has been offered is that a small section of the population which is unhappy with the BJP didn’t want to vote for Congress either.

Manmohan-Singh_0

The trouble with this explanation is that there is no way to verify it. It could even be the opposite.

Anyway, getting back to the point I was trying to make—the BJP won 46 out of the 55 seats in the four biggest cities of Gujarat. How did the electoral results look in the remaining 127 seats? The BJP won 53 of these seats. The Congress won 71. Hence, the Congress clearly did much better than the BJP beyond the four biggest cities.

There will be economic and political implications of these electoral results in other states like Rajasthan and Madhya Pradesh, where the elections are scheduled in the months to come. Some points are as follows:

a) The basic problems in India’s rural economy are not going to go away any time soon. The size of the average agricultural holdings in India has fallen as land has been divided across generations, making agriculture as a profession very non-remunerative.
Over and above this, India has too many people in agriculture than is economically feasible. A recent discussion paper by Niti Aayog points out that as of 2011-2012, agriculture employed 64 per cent of the rural workforce but produced only 39 per cent of the total rural economic output. Hence, for agriculture to be economically feasible 8.4 crore agricultural workers need to be shifted out of agriculture. This is around 70 per cent of the non-farm workforce in the rural areas. This isn’t going to happen overnight.

b) Of course, given this huge disguised unemployment in agriculture, people working in agriculture try to work in other areas as well. But the trouble is that there aren’t enough jobs going around for them. Data from the Labour Bureau suggests that only 52.7 per cent of the people looking for jobs all through the year, in rural India, are able to find one. Given this, nearly one in two people in rural India do not have jobs all through the year.

Hence, rural India has a problem at two levels: 1) Agriculture as a profession is no longer as remunerative as it used to be. 2) There are not enough other jobs, given their low skillsets, which people working in agriculture can take on, to add to their income over and above what they make in agriculture.

This explains why land-owning castes have been protesting all across the country. This includes the Patidar Patels of Gujarat.

c) Given this, the BJP in every state that it goes to election after Gujarat, it is likely to promise a farm loan waiver, as it has done in other states over the last one year. This is going to cost state governments all across the country a lot of money. It will also create moral hazard with future borrowers waiting for farm loan waivers than paying off their loans.

The question is why did the BJP not promise a farm loan waiver in Gujarat? The rural areas in Gujarat are not as badly placed as in other states. One reason for this lies in the fact that the livestock economy in the state, has continued to grow robustly. Also, over and above this, the non-farm economy in the rural areas, created job opportunities because of the overall faster growth in the state.

In fact, farm loan waive offs will become even more important given that, the states of Madhya Pradesh and Rajasthan, are not as urbanised as Gujarat is.

Also, in the run up to 2019 Lok Sabha elections, I see the minimum support price of agricultural crops going up. As per the Shanta Kumar Committee, the minimum support price system benefits under 6 per cent of the farming households in the country. While, increasing MSPs may not benefit many farmers, it does have a strong signalling effect.

d) The Modi government will also look to consolidate its position in the urban and semi-urban areas. And for that, chances are it will waive off Mudra loans of Rs 50,000 or lower. In total, over 7 crore of Mudra loans of less than Rs 50,000 have been given out.

e) As far as the Congress is concerned, it needs to start rebuilding itself, particularly in the rural areas because that is where its support is. This is a rather obvious insight.
To, conclude, the Modi government will give out doles and waive off loans, in order to improve its position. This strategy will not be much different from what the Congress led UPA government led by Manmohan Singh, did in the 2009 elections. This again goes with the broader point that I keep making—India has only one model of governance and that is the Congress model.

In the end, socialism will win. We will have a bigger government in areas that we really shouldn’t.

The column was originally published in Equitymaster on December 19, 2017.

India Has 8.4 Crore More Workers in Agriculture Than is Economically Feasible

Farm_Life_Village_India
One of the themes that I have often explored in my columns and discuss in detail in my book India’s Big Government, is that India has way too many people working in agriculture. Or as economists like to put it, we have huge disguised unemployment in agriculture.

A new discussion paper titled Changing Structure of Rural Economy of India Implications for Employment and Growth, authored by Ramesh Chand, SK Srivastava and Jaspal Singh, and published by the NITI Aayog, makes a few interesting points on this front.

As per this discussion paper, the rural economy in 2011-2012, formed 46.9 per cent of India’s economy, though it employed 70.9 per cent of its workforce.

Most people tend to believe that India’s rural economy is primarily concerned only with agriculture. Agriculture contributes around 12-13 per cent of the overall Indian economy.

Given that, the rural economy contributes 46.9 per cent to the overall Indian economy, it basically means that there are other areas that the rural economy is contributing to as well. And some of the findings of this discussion paper may surprise many people. Let’s look at them one by one.

1) One of the misconceptions that prevails is that rural India is totally dependent on agriculture. The discussion paper sets this right. As it points out: “Contrary to the common perception about predominance of agriculture in rural economy, about two third of rural income is now generated in non-agricultural activities.” This was clearly not the case earlier.

2) This is primarily because agriculture as a profession is nowhere as rewarding as it used to be. As the discussion paper points out: “In year 2011-12 per worker income varied from Rs. 33,937 for agricultural labour to Rs.1,71,836 for rural non-farm workers.” The ratio of rural non-farm rural income to income of agricultural labour has increased over the years, though it has fallen in the recent past.

Take a look at Figure 1. It plots the ratio of non-farm rural income to income of agricultural labour over the decades.

Figure 1: 

Take a look at Figure 2. It plots the ratio of average urban income to that of average income of an agricultural labour.

Figure 2: 

Figure 2 clearly explains why people migrate from rural areas to urban areas. As the discussion paper clearly points out: “Between 2001 and 2011, India’s urban population increased by 31.8 per cent as compared to 12.18 per cent increase in the rural population.

Over fifty per cent of the increase in urban population during this period was attributed to the rural-urban migration and re-classification of rural settlements into urban.” There is a clear economic incentive for people to move from rural areas to urban areas.

3) With two-thirds of rural income now being generated from non-agriculture activities, the rural economy as a whole when it comes to income is moving away from agriculture, but that is not true when it comes to employment. This is something that I have been talking about for a while. Indian agriculture employs way too many people in comparison to what it needs.

The discussion paper points out that in 1970-1971, agriculture formed 72.4 per cent of India’s rural economy, and employed 85.5 per cent of the rural workforce. By 2011-2012, the size of agriculture had nearly halved, and it formed 39.2 per cent of India’s rural economy, but it still employed 64.1 per cent of the rural workforce. This data points shows that agriculture continues to employ many more people than it should.

4) Having said that, there is another point that needs to be made here. While, the overall employment in agriculture given its share in the rural economy remains high, it has fallen dramatically between 2004-2005 and 2011-2012. In 2004-2005, agriculture formed 38.9 per cent of India’s rural economy, while employing 72.6 per cent of the country’s rural workforce. By 2011-2012, agriculture formed 39.2 per cent of India’s rural economy, and at the same time employed 64.1 per cent of the rural workforce.

Hence, there has been a fall in the total number of people dependent on agriculture. But is this goods news?

5) As the discussion paper points out: “Sizable occupational shifts in workforce were also observed between 2004-05 and 2011-12. Out of 33 million workers who left agriculture 27 million (81%) were female and 6 million (19%) were male. Further, outgoing workforce from agriculture comprised both cultivators and agricultural labours with their respective shares of 56 per cent and 44 per cent. It is worth mentioning that out of 27 million female workers who left agriculture, only 5 million joined non-farm sectors and rest withdrew from labour-force itself.”

So, the point is that while lesser proportion of the workforce is now dependent on agriculture than was the case in the past, many of the women who have dropped out of agriculture, have stopped working all together. Indeed, this de-feminisation of the workforce, is a very disturbing trend.

6) The takeaway from the NITI Aayog discussion paper is that in 2011-2012, agriculture employed 64 per cent of the rural workforce and produced only around 39 per cent of its economic output. In an ideal world, a sector producing 39 per cent of output, should employ 39 per cent of the workforce.

For something like this to happen, nearly 8.4 crore agricultural workers need to be shifted to sectors other than agriculture. As the discussion paper points out: “This amounted to almost 70 per cent increase in non-farm employment, which looks quite challenging.” It also amounts to around one-fourth of the rural workforce of 34.2 crore as of 2011-2012. Chances are the 8.4 crore number would have grown between 2011-2012 and now.

Over and above this, the bigger challenge is the agriculture workforce lacks skills to do anything else. As per the discussion paper: “Only 1.3 per cent of the rural workforce of the age group 15-59 years possessed technical education. Similarly, only 14.6 per cent of the rural workforce of age group 15-59 years received vocational trainings, which aim to develop competencies (knowledge, skills and attitude) of skilled or semi-skilled workers in various trades.”

These skills cannot be improved overnight and jobs be created. Hence, the fear is that the current generation of Indians still largely dependent on agriculture, are going to lose out in the process. As time goes by, this looks more and more likely.

7) One area which has added to employment is construction. Construction formed 3.5 per cent of the rural economy in 1970-1971. This increased to 10.5 per cent by 2011-2012. The share of the sector in rural employment in 1972-1973 was at 1.4 per cent. This jumped to 10.7 per cent in 2011-2012.

One area where agricultural workers can be nudged towards is construction. As the discussion paper points out: “Rural areas are characterised by poor infrastructure and civic amenities. Similarly, a large per cent of houses are in need of upgradation. These facts indicate considerable scope for growth of construction sector in rural areas.”

Over and above this, the real estate sector in urban areas can be a huge employment generator. But for that to happen, the prices need to fall, and more than a few real estate companies need to go bust.

While the role of the government in India to be able to achieve anything significant is limited, this is something where both the state governments and the central government, can have a major role to play. Road construction is one area where many jobs can be generated. This can then act as a multiplier for the services sector as well. As people earn more they are likely to spend more.

To conclude, the fact that India has way too many people employed in agriculture, is probably the country’s biggest social and economic challenge. The trouble is no one really is even talking about it, let alone working towards a solution. The first step towards solving any problem is acknowledging that it exists.

The column originally appeared in Equitymaster on Dec 13, 2017.

India’s Agriculture Crisis is Set to Become Worse

agriculture

The gross domestic product(GDP) data for 2015-2016 was declared sometime back. As per this data, agriculture (actually agriculture, forestry and fishing), made up for around 14.1% of the GDP, during the course of the financial year. The trouble is that close to 50% of the population continues to depend on agriculture for a living.

This basically means that agriculture formed around one seventh of the Indian economy during the last financial year. At the same time around half of the population is dependent on it. The point being that it employs many people than it actually should. Hence, there is a huge disguised unemployment in the rural areas.

Disguised unemployment essentially means that there are way too many people trying to make a living out of agriculture. On the face of it they seem employed. Nevertheless, their employment is not wholly productive, given that agricultural production does not suffer, even if some of these employed people stop working

There are many more people than the sector requires and this leads to lower incomes for those who work in agriculture. The broader point is that if the average incomes need to go up, people need to be moved away from agriculture. But a new analysis suggests that this will not happen at the pace it was earlier expected to be.

Akhilesh Tilotia of Kotak Institutional Equities makes this point in a recent research note titled Forecasts of fewer jobs dull demographic sheen. Tilotia is also the author of The Making of India. He reviewed a “set of 24 industry reports commissioned by the National Skills Development Council (NSDC) and compare them with similar reports that NSDC had put together around the end of the last decade.”

The earlier reports had put the size of the Indian workforce at 65.4 crore by 2022. The number is now a lot lower at 57.5 crore. As far as number of people employed in agriculture in 2022 is concerned, the earlier estimates put the number at 11.4 crore or 18% of the workforce. As per new estimates the number of people who are expected to be working in agriculture in 2022, stands at 21.6 crore or around 38% of the workforce.

This basically means that nearly 10.2 crore more Indians will be dependent on agriculture as a mode of living, than was expected earlier. Further, by 2022, agriculture is expected to form around one-ninth of the GDP or the overall economic size of the country.

The automobile sector which was earlier expected to employ 4.8 crore individuals is now expected to employ only around 1.5 crore individuals. The same goes for the food processing sector, which was earlier expected to employ around 1.8 crore individuals, but is now expected to employ only 40 lakh individuals. On the other hand, the numbers for organised retail have gone up dramatically from 1.8 crore individuals earlier, to 5.6 crore individuals, as per the latest estimates.

Long story short, enough jobs will not be created to move people out of agriculture into other sectors where they can make a living.

In fact, as the Economic Survey of 2014-2015 points out: “The data on longer-term employment trends are difficult to interpret because of the bewildering multiplicity of data sources, methodology and coverage. One tentative conclusion is that there has probably been a decline in long run employment growth in the 2000s relative to the 1990s and probably also a decline in the employment elasticity of growth: that is, a given amount of growth leads to fewer jobs created than in the past. Given the fact that labour force growth (roughly 2.2-2.3 percent) exceeds employment growth (roughly about 1½ percent), the challenge of creating opportunities will remain significant.”

As the Survey further points out: “Regardless of which data source is used, it seems clear that employment growth is lagging behind growth in the labour force. For example, according to the Census, between 2001 and 2011, labour force growth was 2.23 percent (male and female combined). This is lower than most estimates of employment growth in this decade of closer to 1.4 percent. Creating more rapid employment opportunities is clearly a major policy challenge.”

One reason why enough jobs are not being created is because of what economists call falling labour intensity. Economic growth now generates fewer jobs in the non-farm sector (industry including manufacturing, construction, mining and utilities plus services sector) than it used to earlier. For every 1% increase in the gross domestic product, the non-agricultural employment went up by 0.52%, between 1999-2000 and 2004-2005. This fell to 0.38% between 2004-2005 and 2011-2012. (Source: D.Joshi and V.Mahambare, HIRE & LOWER–Slowdown compounds India’s job-creation challenge, Crisil Research, January 2014)

Hence, economic growth does not translate into the same number of jobs as it used to in the past. This basically means that economic growth is less labour intensive. This has happened primarily because of two reasons. First, the economic growth now is driven by less labour intensive sectors like business and financial services as well as information technology and information technology enabled services. These sectors require only one or two people to produce Rs 10 lakh of real value added Gross Domestic Product or economic output. This basically means that faster growth in these sectors does not necessarily translate into jobs. (Source: D.Joshi and V.Mahambare, HIRE & LOWER–Slowdown compounds India’s job-creation challenge, Crisil Research, January 2014).

This is clearly a big problem which does not have easy answers. Further, people dependent on agriculture are low on skill-sets that are needed for jobs in other sectors. It also needs to be pointed out here that moving people from agriculture into other areas is not so easy.

In fact, other countries which have grown at a very fast pace in the past, have experienced the same phenomenon. TN Ninan makes the point in The Turn of the Tortoise. Take the case of Thailand. Agriculture still constitutes close to 40% of its workforce. Or China, which has become the factory of the world. Around 35 per cent of the workforce is still engaged in agriculture, even though it produces just 10 per cent of the Chinese economic output.

The column originally appeared in the Vivek Kaul Diary on June 9, 2016

The shift from agriculture to manufacturing will not be easy

make in india
One of the points that I have often made in The Daily Reckoning is about close to 50% of Indians being engaged in agriculture generating around 18% of the Indian gross domestic product (GDP). What this clearly tells us is that agriculture is a low-income earning activity.  It also tells us is that there are many more Indians employed in agriculture than there should be. And this can be made out from the fact that only 17% of Indians employed in agriculture, survive on money they make from it. The rest, have to do some other work along with working on the farm, in order to add to their meager income.

Hence, it’s a no-brainer to suggest that people need to be moved out from agriculture into other higher paying areas like industry and services. As TN Ninan writes in his new book The Turn of the Tortoise—The Challenge and the Promise of India’s Future: “Both productivity and incomes will go up substantially if more people can be moved from low-paying agriculture to higher-paying industry and services—a key transition the country has barely begun.”

The Make in India initiative of the Narendra Modi government should be seen in light of this. The programme envisages “an increase in the share of manufacturing in the country’s Gross Domestic Product from 16% to 25% by 2022” and “to create 100 million additional jobs by 2022 in manufacturing sector”.

One reason why this target at best remains a pipedream is because of the lack of education among Indians. The rate of literacy as per the 2011 Census stood at 74.04%. As this website points out: “Compared to the adult literacy rate here the youth literacy rate is about 9% higher. Though this seems like a very great accomplishment, it is still a matter of concern that still so many people in India cannot even read and write.”

The trouble with this literacy number is that it does not give you the whole picture. As per the Human Development Report 2014, the average Indian male has around 5.6 years of schooling and an average Indian female has around 3.2 years of schooling. Both Bangladesh and Pakistan are ahead of us. For Bangladesh, the numbers being 5.6 years and 4.6 years, respectively. For Pakistan, the numbers stand at 6.1 years and 3.3 years, respectively.

And this is where the plan to move people from agriculture to industry or services for that matter, starts to go haywire. As Ninan writes: “Acquiring job-related skills without the benefit of a basic education is a challenge—it is hard to be a fitter or an electrician at a construction site if you don’t know basic arithmetic and can’t read simple instructions on a product pack.”

What this means is that the Make in India plan cannot take-off beyond a point unless our primary education system starts to improve. Individuals need to spend more time in school receiving better quality education. As things stand currently not much is being learnt in schools.

In fact, surveys have pointed out that most children cannot read basic text. The Annual Status of Education Report facilitated by Pratham points out that only 48.1% of children enrolled in Class V could read standard II level text. This means more than half of children enrolled in standard V cannot read standard II level text. In fact, more than one-fourth of children enrolled in standard VIII could not read standard II level text. The report further points out: “The gap in reading levels between children enrolled in government schools and private schools seems to be growing over time.”

And this is a worrying factor. Further, moving people away from agriculture into other more productive domains is a time taking process. As Ninan writes: “Thailand, one of the most successful manufacturing countries, has those in agriculture continuing to account for 40 per cent of its workforce. China, despite its considerable success in building a factory sector, has 35 per cent of its workforce still engaged in agriculture, generating about 10 per cent of its GDP.”

The point being that “whether one likes it or not, the transition away from agriculture as the primary source of employment is going to be slow”.

So what is the way out? Ninan suggests that one way out is to increase productivity of Indian agriculture. “Paddy output per hectare [in India] at about 3.7 tonnes, is 20 per cent short of the global average and barely half of China’s. One reason is that Indian farmers are not using the latest strains of high-yield varieties (growing them is also more employment-intensive) or adopting new methods of cultivation that require less water. It’s the same with maize,” writes Ninan. If these numbers were increased India’s agricultural output would go up in the days to come, and so would the income of people dependent on agriculture for their living.

The problem here is that the size of farms over the decades has grown smaller. Take a look at the accompanying table from the annual report of Department of Agriculture and Cooperation 2013-2014.

What does the table tell us? It shows very clearly that most farms are small in size and less than two hectares in area. 85% of the farms are less than two hectares in size and 67% of the farms are less than one hectare in size. And this doesn’t help the productivity cause at all.

As Mihir Sharma writes in Restart—The Last Chance for the Indian Economy: “Indian farms are tiny. Over 80 per cent of them are smaller than 2 hectares…And they are getting even smaller. They are just over half as big today, on average, as they were in 1970. Everywhere else in the world, farms have gotten bigger in the same period…Many people have been convinced that if there was just some way to increase agriculture’s share of output, some way in which all of agriculture received ‘support’, things would be better.”

Only if it was as simple as that.

The column originally appeared on The Daily Reckoning on October 20, 2015

Rahul Gandhi’s latest jai kisan rhetoric doesn’t quite work

rahul gandhiRahul Gandhi 2.0 is angry-and this anger is making him take ‘potshots’ at the Narendra Modi government almost every other day. Okay, I know it is politics. And I know that he is not angry. And I know that he is trying to rediscover himself. And I know that he is trying to ensure that the party of his ancestors doesn’t become totally irrelevant in the days to come.
Rahul’s latest jibe at the Modi government came yesterday when he said in Punjab: “Does the farmer not make in India?…Your government did nothing when hailstorms destroyed their crop?”
This after he had told a farmers’ rally in New Delhi earlier this month that: “We[i.e. the Congress led UPA government] increased the MSP of wheat from Rs 540 to Rs 1400…The MSP has not changed, no benefit to farmers.”
These statements are in line with the dole based politics and economics practised by the Congress party over the years. The trouble is the country has had to pay a huge cost for this. Allow me to explain. 
The MSP is the price at which the government buys rice and wheat from the farmers, through the Food Corporation of India (FCI) and other state government agencies. The MSP of rice was increased rapidly by the Congress led UPA government starting in 2007.
Between 2007 and 2014, the MSP of rice jumped up from Rs 580 per quintal to Rs 1310 per quintal, an increase of 12.34% per year. In case of wheat, the MSP started increasing from 2006 onwards. Between 2006 and 2014, the MSP of wheat jumped up from Rs 650 per quintal to Rs 1400 per quinta, an increase of around 10.1% per year.
The Table 1 shows the buffer stocks and the strategic reserves that the FCI needs to maintain at various points of time during the course of the year. 

Table 1


Now look at Table 2 which shows the stocks that FCI maintained at various points of time in 2014. A comparison of both the tables clearly tells us that FCI is stocking significantly more rice and wheat than what it is required to do. Interestingly, after the Narendra Modi led NDA government came to power, FCI has been going slow on procurement. In the earlier years the FCI was stocking even more than what it currently is. 

Table 2

As on 

Rice

Wheat

Total (in lakh tonnes)

Jan 1, 2014

146.98

280.47

427.45

April 1, 2014

202.78

178.34

381.12

July 1, 2014

212.36

398.01

610.37

Oct 1, 2014

154.22

322.63

476.85

Source: www.fciweb.nic.in


What the comparison of the two tables clearly tells us is that as the MSP prices have been increased, more and more rice and wheat have landed up with the government than what is required by it to run its various food programmes. In fact, the data clearly shows that before 2008 FCI bought as much rice and wheat as was required to maintain a buffer as well as a strategic reserve.
During and after 2008, the purchase of rice and wheat simply exploded. The reason for this is fairly straightforward. In the financial year 2008, the MSP of wheat was raised by 33.3%. In the financial year 2009, the MSP of rice was increased by 31.8%. And this led to farmers producing more rice and wheat in the years to come. This rice and wheat landed up with the government. FCI did not have enough space to store these grains and that explains why newspapers regularly carried pictures of rice and wheat rotting in the open, even though food inflation was rampant
The MSP policy run by the Congress led UPA government has now led to a situation where Indians farmers are producing more rice and wheat than what is required. In fact, influenced by this steady increase in the price of rice and wheat states like Punjab and Haryana, which have a water problem, are growing huge amount of rice and wheat. These crops are huge water guzzlers. Further, farmers are not growing enough of vegetables and fruits, where the prices have increased at a fast pace.
Also, when the government becomes dole oriented that leaves little money for it to do other things. At the end of the day there is only so much money that even a government has. As an editorial in The Financial Express points out: “This year, the government plans to spend around Rs 2.3 lakh crore on the food economy, including the food subsidy, and a very small fraction of this is for either crop insurance (imagine what that would do for farmers right now) or for creating irrigation facilities (imagine what that would do when the monsoon fails).”
Rahul Gandhi yesterday talked about the government not doing anything for the farmers after the hailstorms destroyed their crops. His government was in power for ten years what did they do on the crop insurance front? Why was the entire focus of the Congress led UPA government in making the farmer dependant on the government?
Interestingly, Rahul’s mother Sonia has written to the food minister Ram Vilas Paswan seeking a relaxation in the quality of wheat that the government buys from the farmers. As per the current regulations FCI does not buy wheat with a moisture content of greater than 14%. The Times of India reports Paswan as saying that: “permitting more moisture content beyond this level would mean the grain would be unfit for human consumption.” The newspaper also reports a food ministry official as saying: “There is no procurement of grains with more moisture content than the permitted limit. The procurement is being done as per the food safety standard law.”
This is a fair point. The government can’t be procuring wheat which is unfit for human consumption. Also, there is something majorly wrong in the state of the nation, where more than 65 years after independence, the main opposition leader suggests that the government buy wheat which is essentially not fit for human consumption.
This scenario would have never arisen if a crop insurance policy that covered a major section of the farmers had been in place. Who is to be blamed for this? Narendra Modi who came to power only 11 months back? Or the Congress party run by the Gandhi family which has been in power in each of the decades since independence? The answer is obvious.

The column originally appeared on The Daily Reckoning on Apr 30, 2015