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Budget focus on rural economy and agriculture

Sheshadri Chari

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Agriculture and rural sector have been the backbone of any economy in the world and more so especially in India. The revival and dominance of the Chinese economy started with the strengthening of the farmers. Even developed economies of the world give special and protectionist treatment to agriculture. Reviving and strengthening the agriculture sector and rural economy have suddenly become very important for the present government given the fact that elections are increasingly being influenced by the rural voters more than the urban voters. Even from sheer economic prosperity point of view, Indian economy depends on a robust rural and agricultural growth more than probably the industrial production and service sector. Little wonder, that the Finance Minister has more than once emphasized that agriculture will be the prime area of focus.

The fourteenth Finance Commission recommended that there should be an increase in the states’ share of the total central tax collection. Accepting this recommendation as a step towards cooperative federalism and considering the fact that more than half the state governments are ruled by the BJP or their allies, the centre readily increased the state share. But correspondingly many central schemes were also withdrawn or their outlays curtailed. The states began allocating the central tax component to urban schemes like roads and water supply and other urban requirements. This considerably reduced allocation to rural and agricultural schemes. Rural economy, already witnessing a setback as a result of demonetisation and introduction of GST, was left cash-starved. As a result of this, the farm sector abandoned all new inputs in the sowing season. Naturally,  the agricultural production saw a drastic fall and consequential lower growth in the wholesale price of agro products. The anti-inflationary measures, much to the benefit of the urban population, kept the wholesale price lower but came as a dampener to the farmers.

Many of these factors have forced the farmers to take back very little from the mandis. The rural expenditure by the states was about fifteen percent in 2005-2006 and rose to thirty-six percent in 2014-2015 but came down drastically to an all-time low of about eleven percent in 2016-2017. The Finance Minister in his budget speech has recognised this fall in rural expenditure and promised to allocate more for the farm sector. Many of the reports prepared and released by the agriculture ministry highlighted the alarming figures pertaining to widening gap between agricultural production and income levels.

Realising the urgency of the situation and needs of the farmers, Finance Minister Arun Jaitley has provided increased institutional credit target for agriculture for the financial year 2018-19 amounting to Rs 11 lakh crore from Rs 10 lakh crore. This will allow the government to step up the efforts to ease availability of funds to the farmers and for the agriculture sector in general. The recent events have highlighted the discontent among farmers who have to increasingly depend on secondary sources such as local money lenders for small loans and accommodation money, highly detrimental for them as well as the rural economy.

The Finance Minister has reiterated the government’s resolve to treat agriculture sector as an enterprise. This means the farmers’ income has to go up in proportion to their land holding, crop pattern, and investments such as input cost etc. In a way, agriculture should be treated as an industry and subject to all the factors of production, sales, and consumption.

Keeping in view the importance that agriculture has assumed, the finance minister has carefully crafted this budget with maximum emphasis on rural and agriculture sector.

The proposal to implement MSP for all crops is a very encouraging one, especially for the farmers as most of them, depend on multi-crop farming. Besides, the MSP has been increased to 1.5 times of the production cost. This will immensely benefit the small and marginal farmers who account for almost 86%. But there are two issues here. One is that the system of determining the cost of production is a very cumbersome one and is usually decided by a set of people who are directly concerned with agriculture. Again they take a very long time, sometimes as much as six to eight months to decide the cost of production and the MSP based on it. Another factor is the multiplicity of produce. In these circumstances, by the time the MSP is decided and implemented, the market has changed and the demand-supply position would have altered.

The budget also proposes to upgrade Grameen Agricultural Markets and APMCs that are the lifeline of the agriculture. There are also incentives for Women Self help Groups to undertake organic farming. All over the world organic products have a good market. But this will also require tweaking of the pesticides and other inputs that go into organic farming.

The Budget has also allocated 2000 crores for building rural infrastructure mainly to assist in agriculture. This is no doubt a welcome step but the amount is woefully small compared to the requirement. Anything less than two lakh crores for rural infrastructure should be considered insufficient if one has to do a sincere and sustainable job.

The provision of ten lakh crores as a credit to farmers with 60 days interest waiver and an increase of NABARD fund to 40,000 crores is also a welcome step. The idea of setting up smaller Krishi Vigyam Kendra for soil testing and extending other advisory services to farmers will be seen as a very constructive step if they are implemented with all sincerity and monitored properly.

The proposal to set up dedicated micro irrigation fund under the supervision of NABARD with an initial corpus of 5000 crores is also a very encouraging step. This again will help in identifying and bringing non–irrigated land into the fold of arable land.

The first Budget after the announcement of GST has come as a huge relief to farmers and is expected to give a fillip to the rural economy and the agriculture sector which has witnessed many stressful years.

About the author:

The author is member of the National Executive Committee of the BJP and an expert commentator on economic and strategic issues

Chari Talks

North East votes for development

Sheshadri Chari

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 The BJP’s spectacular victory in the recently held elections in three states of North East reiterates the faith people have in its development agenda. The victory also underlines the need for BJP to take the electoral victory seriously and develop North East so as to be the gateway to South East Asia.
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India-Iran come closer

Sheshadri Chari

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Iranian President Hassan Rouhani’s three day India visit reiterates New Delhi’s commitment to assist Afghan peace process and build the Chabahar port as an alternative approach route to the energy rich Eurasia. The two oldest civilisations have come closer to chart a new course, create new history and probably a new geography too.
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Chari Talks

US looking for an alternate route to AF

Sheshadri Chari

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After the recent spar between the US and Pakistan, the Trump administration is seriously considering making changes to its Afghanistan road map. The US recently decided to suspend nearly two billion dollar security assistance to Islamabad as Pakistan was not taking any steps to contain terror activities emanating from its soil. India has been alerting the US and other countries of the dangers of Pakistan based terror training institutes operated by the Pakistan army and the ISI.

The US administration, supported by Pentagon, is understood to have initiated urgent measures to take steps for risk mitigation plan to reach uninterrupted supplies to its troops in Afghanistan. There are about 14 thousand US forces in Afghanistan, besides other para-military and humanitarian organisations.

The US made a second comeback in Afghanistan after the Russian support to anti US forces in Kabul extending its control over a vast region. Unable to tackle the situation, US strategists set up mercenary recruiting and training camps to work as foot soldiers for US army. The recruits known as Taliban grew into a strong and formidable force challenging not only the dispensation in Kabul but also the US forces that initially set up and funded its cadre.  

Finally, the Taliban was ousted from Kabul in 2001 and much of its attack capability was contained.

Following a series of counter-terrorism moves, International troops were sent to Afghanistan by the Western military alliance NATO as a sequel to the 9/11 attacks on World Trade Centre in the US.

The number of Nato forces went up to about 1,40,000 around 2011 but slowly came down year after year as NATO countries began to withdraw from combat operations. Most of the anti-terrorism and combat operations were handed over to Afghan security forces and law and order activities were given to Afghan Police.

As of now troops still in Afghanistan are from US, Georgia, Germany, Turkey, Romania, Italy, the UK and Australia. As recently as November 2017, the NATO decided to send a contingent of 3 thousand troops mainly for training and capacity building activities. But the NATO and the US still feels the need to keep a combat-ready force to effectively deal with any resurgence of Taliban and other terrorist outfits like the ISIS which have a large mercenary force ready to strike and destabilise Kabul.

But the US has a much more serious issue on hand. The Trump administration has initiated a series of actions against Islamabad, from cutting military aid to naming and shaming some of the terrorist outfits operating from Pakistan fully patronised by the army.

As a result Pakistan is all set to retaliate and hit the US where it hurts the most.

In 2013, Pakistan Taliban leader Hakimullah Mehsud, was killed in a US drone strike attack. He was on the list of most-wanted terrorist. The “KILL LIST” terrorist, who carried a bounty of 5 million US dollar on his head, was suspected to have been behind a deadly suicide attack on a CIA base in Afghanistan, car bombing attempt in New York’s Times Square and many other terror attacks in Pakistan killing thousands of civilians and security forces. In spite of his terror agenda, Islamabad wanted to hold peace talks with Hakimullah Mehsud and migrate him to “good Taliban” list.

Following his elimination in a drone attack, Imran Khan’s Tehreek-e-Insaaf party forced the provincial government in Pakistan’s northwest state of Khyber Pakhtunkhwa to enforce a blockade preventing the free movement of US and NATO forces.

The route from the northwestern city of Peshawar, one of several overland routes used by the NATO for getting vital supplies into Afghanistan was blocked. This important route is used to transport equipments and military hardware out of Afghanistan as part of US withdrawal of combat force. After four months of negotiations, the blockade was lifted.

In fact, prior to the Tahreek-e-Insaf blockade, the Pakistani government had also enforced a blockade of NATO supply routes in Afghanistan.

In June 2012, 24 Pakistani army personal were killed by a US air attack on their contingent. They were believed to have been part of a terrorist training camp but both the army and the civilian government in Islamabad strongly denied it. Meanwhile, the Pakistan government imposed a seven-month stoppage of NATO movement through Pakistan putting huge pressure on military supplies to NATO forces in Afghanistan. Finally, US had to pay a heavy price to cajole Islamabad to lift the blockade.

It is little wonder that the Trump administration is considering alternatives to keep a steady supply route to NATO forces with boots on the ground in Afghanistan. Unfortunately, the only other alternative route available to the US is the Chabhahar port in Iran. But it is very unlikely, rather impossible, that Tehran will allow US to use its facility, especially at a time when White House is clapping at the civil unrest against the Khomeini regime.

So, what is the other alternative?

Ideally, the US should cooperate with India and support the freedom movement in Balochistan anf Sindh. Balochistan was illegally occupied by Islamabad in 1948 and since then the patriotic Balochis are resisting the forced take over of their land and resources. Worst is, Pakistan has handed over Balochistan along with all its resources to China as part of the China Pakistan Economic corridor. China has moved its army into Balochistan to protect its assets and carry trading with Africa through Gwadar port. This has serious security implications for India and also world trade as China is effectively controlling the choke points in the Indian Ocean region.

The White House knows the importance of the Indian Ocean region and should realise that it has already lost important strategic space in the Indian Ocean. Any more delay in preventing the Pakistan-China nexus from going to the next level will seriously impact US interest in the region and also in its efforts in safeguarding its interests in the Indo-Pacific.

Is Mr. Donald Trump listening?

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