The long-term dynamics of development and historical experience of other countries indicate that as an economy grows the share of agriculture in GDP and employment goes down.

As far back as 1918, B R Ambedkar had warned of the dire consequences if people were not taken out of agriculture. But even after a century since Ambedkar’s warning India’s economy is still agrarian.

According to the Socio-Economic and Caste Census, SECC in 2011, out of 24.39 crore households in the country, 17.9 crore households are in villages and most of these (around 50 per cent) are directly engaged in agriculture.

Indeed, the agriculture sector is a critical segment of India’s economy in terms of employment and income generation.

However, farming has now become a risky business, far riskier than industry. Twice every year, farmers first face a production risk and then a price risk. The average monthly income of the farm household was estimated to be about Rs. 6,426 by the Situation Assessment Survey of Agricultural Households ~ NSS 70th round (2014).

Farm incomes have almost stagnated during the past four years, partly due to falling prices, output and import glut and demonetisation. Nearly 70 per cent of India’s 90 million agricultural households spend more than they earn on an average each month, pushing them towards debt, according to an IndiaSpend analysis of various government data.

The impact of the outstanding loan to farmers manifests itself in various forms in the rural economy, the most visible one being suicide. The latest data on suicides shows that in 2015, a total of 12,602 people in the country’s farming sector committed suicide.

This comes to one suicide every hour that year. The data also dwells on the loan-waiver demands in Maharashtra, Madhya Pradesh, Uttar Pradesh, and Tamil Nadu, which account for more than 50 per cent of farmers’ suicide in the country. This is indeed a major national tragedy.

Farmers’ distress seems to have reached a tipping point, with scenes of dejected farmers throwing agricultural produce such as vegetables and milk on the roads in many places.

Rather than address the genuine problems of farmers, politicians are shamelessly busy scoring points over deaths of innocent farmers. However, stung by the farmers’ agitation expressing their discontent, the Government of India in its Budget 2016-17 made an explicit announcement of doubling farmers’ income by 2022. The well-being of the peasantry depends on how they get the value of their produce.

If the government’s pricing policy is unfair, then the community can never thrive. Increasing agricultural output leads to fall in prices. This can to an extent be arrested by declaring and enforcing the minimum support price (MSP) ~ the price above the market price for the commodity in question.

MSP is a form of market intervention by the government to insure farmers against any sharp fall in prices. The MSP was announced by the government for the first time in 1966-67; it covered wheat in the wake of the Green Revolution to save farmers from depleting profits.

Since then, it has been an integral part of India’s agricultural price policy. Presently the MSP has been announced by the Centre for as many as 25 crops (14 kharif, seven rabi and four other crops) at the beginning of each season viz. rabi and kharif.

To tackle the agrarian crisis and farmers’ distress, the National Commission of Farmers (NCF) was set up in February 2004 under the chairmanship of Sompal. Subsequently it was led by M S Swaminathan.

The Commission categorically recommended that MSP should be fixed at a level that is 50 per cent higher than the comprehensive cost of production.

Though the recommendation was not incorporated in the National Policy for Farmers 2007, the BJP promised ~ in its election manifesto for 2014 Lok Sabha elections ~ to introduce the Swaminathan recommendations on MSP.

But after coming to power, the party did not bother to keep its promise; rather it was submitted before the Supreme Court, through an affidavit, that the government cannot implement the Swaminathan MSP.

The recent Gujarat elections revealed the political implications of the farmers’ movement that put the Union government under tremendous pressure for taking up the farmers’ issue seriously.

As a result, the finance minister, in the Union Budget for 2018-19, has announced the proposal to hike the MSP of the upcoming kharif crop at a level that is 50 per cent higher than the cost of production, ostensibly to benefit farmers. It has been claimed that this decision to hike the MSP is a “historic” step towards doubling the farmers’ income as promised in the earlier budget.

However, on close scrutiny, the assurance of a major hike in MSPs appears to be misleading and has overtones of political expediency. It is not clear whether the government is thinking of C2 (the comprehensive cost of the farmer) or only A2+FL (paid out costs plus imputed wage of family labour).

If the latter is taken as cost of production, there is nothing new in the announcement because MSPs of the bulk of the rabi crop have remained 50 per cent higher than A2+FL for the last 10 years and MSP for wheat is now more than 100 per cent.

In 2014, MSPs for most crops exceeded A2+FL by more than 50 percent. Will the government now reduce the MSPs? Indeed, the use of the term, “historic”, has rendered the farmers delusory.

Farmers do deserve remunerative prices for their produce. For the last several years farmers and their organisations have been demanding the Swaminathan MSP.

But it is grossly inappropriate to fix the MSP in a mechanical manner. The Commission for Agricultural Costs and Prices (CACP) is the actual authority for working out the MSP.

Before fixing the price tag every year, the authorities analyse a wide spectrum of information and data ~ the cost of production, change in input prices, input-output price parity, trends in market prices, demand and supply, intercrop price parity, the international price situation, implications of subsidy, the impact on the cost of living and so on.

(To be concluded)

The writer is a retired IAS officer