As Agrarian Crisis Deepens, the Outcome of India’s General Election becomes less Certain

23 January 2019 Phoebe Sleet, Research Analyst, Global Food and Water Crises Research Programme

Background

As India prepares to hold a general election in the coming months, an economic slump has highlighted growing insecurity in its agricultural sector. In November and December, state elections proved devastating for Narendra Modi’s Bharatiya Janata Party (BJP), which lost power in three key states. Those states, Chhattisgarh, Madhya Pradesh and Rajasthan, were all considered BJP strongholds. They are also all predominantly agrarian, with a high share of GDP and a large of the workforce tied to agriculture. While agriculture will only be one of many factors that will influence the general election this year and Modi remains personally popular, the results of the state elections suggest that a distressed agricultural sector means a BJP win is not guaranteed.

Comment

Despite Modi promising deep reforms to help India’s struggling farmers, the agricultural sector has seen a consistent decline since the BJP’s rise to power in 2014. Since Modi became Prime Minister, growth in the sector has slowed from 5.2% to 2.5%. This decline has contrasted sharply with the overall growth of the Indian economy, which has been between six and eight per cent annually. While growth in agriculture has fallen, the sector is still responsible for 43 per cent of Indian employment opportunities, making the rural vote indispensable for parties in the upcoming election.

The Indian Government has made some efforts to cushion the impacts of worsening conditions for farmers, mainly through the usual short-term formulas of imposing farm loan waivers and raising minimum support prices (MSPs). While these measures have for a long time allowed governments to claim they are doing something to improve conditions for farmers, they have seldom had any real impact on their intended recipients. Farm loan wavers only apply to formal lines of credit, which neglects the nearly 90 per cent of farmers who have taken loans from private lenders. For loans given by banks, the waivers are a temporary measure that has no identifiable impact on rural productivity, wages or consumption. Similarly, MSPs have not been especially effective at reducing rural poverty or increasing incomes, despite their political popularity.

The piecemeal solutions offered by the Indian Government have not been enough to avert a crisis in rural areas that have seen recurrent agrarian protests since 2017. A series of deeply unpopular policy decisions by the Modi government has exacerbated resentments among rural voters. In 2016, Modi announced that all 500 and 1000 rupee notes would no longer be accepted as legal tender. This was, ostensibly, to eliminate fake notes and to encourage a shift from cash to digital currency. It also had overwhelmingly negative repercussions for the largely cash-based agricultural sector, causing widespread financial difficulties in rural areas. A haphazard rollout of a goods and services tax also caused financial shocks in rural areas.

The fragile position of rural workers has been made worse by India’s shaky economic situation over the last year. In 2018, 11 million jobs were lost, around 83 per cent of which were in rural areas. Food prices have also rapidly deflated over the last six months, despite MSP rises. This has forced rural incomes down, while agricultural inputs, such as fuel and fertiliser, have become increasingly expensive.

Adding to rural difficulties has been a series of below-average monsoon rains, which has led to poor harvests and contributed to India’s ongoing water crisis. While the BJP government cannot be held responsible for low rainfall, initiatives to improve irrigation to combat the problem have been plagued by bureaucratic delays.

A poor showing at the state elections last year does not mean that the BJP will definitely lose its grip on power in the upcoming elections. As the agrarian crisis grows, however, and farmers become increasingly disaffected, Modi’s future as prime minister has become markedly less certain.

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