politics

One Budget, Nine Elections, 1.3 Billion People: India's Big Year

Updated on
  • Modi’s last chance to woo rural India before 2019 election bid
  • Feb. 1 budget to focus on boosting lives of farmers, villagers
A farmer in Palwal district, Haryana. Photographer: Anindito Mukherjee/Bloomberg

Normally a field of lush green wheat stalks would lift Kishan Singh’s spirits. Yet weak prices mean even a good crop this year may not stop debt collectors from kicking him off his land in northern India.

More than 60 people in Dhamaka, a village of about 230 families some 80 kilometers (50 miles) from India’s capital New Delhi, have received notices threatening to auction their fields. Singh urgently wants Prime Minister Narendra Modi’s government to provide debt relief, better prices for his crops and jobs for his sons when it unveils the annual fiscal budget on Feb. 1.

“I don’t know how to escape from this crisis,” Singh, 62, said this month while showing the notice to immediately repay 247,296 rupees ($3,886) he owes to the bank. While he previously voted for Modi, he’s unsure who will get his vote in the next national poll due early next year.

Time is running out for Modi to shore up the support of rural voters who underpinned his rise to power in 2014, when he won India’s biggest mandate in three decades. The budget will be the last opportunity for him to announce significant fiscal measures that could win back villagers like Singh.

“Governments that choose to focus on urban voters and urban issues have rarely met success at the ballot box, and I would expect the budget will mark a shift to issues relevant to farmers,” said Richard Rossow, who holds the Wadhwani Chair in U.S.-India Policy Studies at the Washington-based Center for Strategic and International Studies. “There are few political risks to a renewed focus on rural voters.”

A woman lights a clay oven at her home in Dhamaka village, Haryana.

Photographer: Anindito Mukherjee/Bloomberg

Rising discontent in rural areas and unrest among farmers is pressuring Modi to spend more on the countryside -- home to about 68 percent of India’s 1.3 billion people and a key voting bloc in the world’s largest democracy. Modi has promised to increase the living standards of villagers and double farmers’ income by 2022.

BloombergQuint Explains: India’s Fiscal Deficit

Clock’s Ticking

Modi sensed the anger in December elections in his home state of Gujarat, as his Bharatiya Janata Party failed to reclaim its rural seats. He’s facing a further eight state polls this year against political groups including the main opposition Congress Party, which has seen recent success in harnessing the anger of villagers.

“He got a bit of a shock from Gujarat. He realizes you can’t just rely on urban sector,” said Raghbendra Jha, an economics professor at the Australian National University. Modi is expected to use the budget to push for more farm insurance, expand cold storage and improve logistics from production to marketing, he said.

Finance Minister Arun Jaitley this month called the agriculture sector the government’s top priority, noting the country’s economic growth is not “justifiable and equitable.”

Beyond the rural sector, Modi faces pressure to put more money in the pockets of ordinary Indians by widening tax brackets and offering more exemptions. But concerns on fiscal slippage could limit his choices.

While higher spending on the hinterlands may boost economic growth from a projected 6.5 percent, it also risks stoking inflation and derailing Modi’s budget deficit target of 3 percent of gross domestic product for the next fiscal year.

Hard Work, Less Pay

Doubling farm income by 2022 will be a challenge for Modi

Source: NITI Aayog

Conscious about being seen as a government that favors the business elite over the poor, Modi has launched several schemes for rural people and unemployed youth. Still, agricultural growth was less than 1 percent because of back-to-back droughts in 2014 and 2015, as well as the failure of increasing crop yields to translate to higher incomes.

Rising Distress

Unemployment rates in rural areas increased in 2015-16 from two years ago, while outstanding agricultural loans swelled and the number of farmers committing suicide rose 42 percent in 2015 from a year earlier.

Slow Start

Rural spending under Modi has stayed below 5% of total expenditure

Source: Federal budget documents

Data based on allocation to rural development department

Rural wage increases haven’t been enough to cover consumption requirements. And although a normal monsoon in 2016-2017 helped produce bumper harvests, a jump in supply has suppressed prices and farmers have struggled to make a profit.

Read more: Price Woes Bring Indian Farmers to Streets as Monsoon Pours

Modi has already started paying more attention to rural India. He gave the highest ever allocation to a rural job guarantee program in the current year ending March, and spent more on providing houses, drinking water and building rural roads. The government also raised minimum support prices, pushed for crop insurance, integrated agriculture markets and provided more bank loans to farmers.

“We will take infrastructure and livelihood to its scale,” Amarjeet Sinha, top official of the ministry of rural development said in an interview in New Delhi. To address rural distress, he said the government plans to prioritize farm gate processing, spend more on roads, housing and irrigation as well as invest in programs to develop organic farming clusters and skill rural youth.

Still, in many rural areas like Dhamaka the initiatives haven’t been enough to lessen the distress.

A water pump in Dhamaka village.

Photographer: Anindito Mukherjee/Bloomberg

Earlier this month, villagers stood in a queue to purchase drinking water because their ground water was contaminated. The water supply from a nearby canal had been stopped, making it difficult to irrigate fields. In the last four years, only six of nearly 300 young people in the village have found jobs outside of agriculture.

Kishan Singh

Photographer: Anindito Mukherjee/Bloomberg

Kishan Singh faces a constant battle to feed his 17-member family as prices of his farm produce have fallen. Despite the hardship, Singh has provided education to four of his boys and two have also received government-sponsored skills training. So far none have a job.

“After providing education and skills, if none of my children are getting employment, then where is the development?” asked Singh. “Government schemes do not reach to us.”

— With assistance by Shruti Srivastava, and Archana Chaudhary

(Updates with official’s comment in 16th paragraph.)
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