At its most basic, India’s political economy is this: *Farming has to produce enough food for 1.3 billion Indians.
At its most basic, India’s political economy is this: *Farming has to produce enough food for 1.3 billion Indians.
*Food, the most basic of necessities, has to be relatively cheap. *But high output and low prices lower farmers’ income. *More so, because way too many Indians are engaged in inefficient farming.
*So, there is always a tension between low food inflation that benefits all poor/low-income Indians and low farm incomes that hurt farmers, especially small farmers. *An additional complication is that a lot low-income Indians are small farmers.
*Finally, as every well-off urban Indian who doesn’t bother to vote knows, elections are decided by votes of low-income Indians, whether rural or urban.
So, there you have the key dilemma for any government how to keep prices low and farm incomes not-so-low. Reelection chances brighten when both can be delivered.
BJP’s government has kept prices low. But it hasn’t been able to increase farm incomes. So, in terms of the basic political economic binary, BJP’s possible electoral gains from low inflation were confronted with possible electoral losses from low farm income.
That’s the context in which to best understand PM-KISAN, the first central income transfer scheme for farmers — it directly addresses the second element of the basic political economic binary. This binary also makes clear why GoI wasn’t keen on a bigger income transfer scheme. Because that would have increased fiscal deficit considerably, which would have been potentially inflationary. A moderate-income transfer scheme for farmers was the best bet to address both elements of the binary.
Speaking politically, why didn’t the government announce a farm income transfer scheme earlier, as some observers are asking? The argument is that an earlier rollout would have made implementation smoother, and therefore making electoral benefits for BJP more assured. But look at it the other way. BJP didn’t want to spend too much on an income transfer scheme — the deficit-inflation link. Reducing other subsidies and making fiscal space for a larger income scheme was feasible on paper, but politically out of question.
Therefore, an earlier rollout would have distributed sums of money for, say, two or three quarters before elections. And the Opposition, which doesn’t bear fiscal responsibility, would have had plenty of time to critique the cash transferred as too small and would have promised bigger transfers. Small farmers, already used to getting a cash transfer months before polls, may have found the Opposition’s promise more attractive.
A near-election-time rollout, provided implementation is not horribly botched up, is cleverer politically. As ET has reported, a total of Rs 4,000, in two Rs 2,000 tranches, is likely to be transferred to small farmers just before polls. Money in the bank is money in the bank.
So, the Opposition may keep saying the scheme means farmers will get only Rs 17 a day, and promise bigger transfers, but it is less likely to have sufficient campaign time to counter the feel-good factor that may be engendered by Rs 4,000 in a small farmer’s pocket just as polls kick in.
At around 16-17 per cent of annual income from cultivation for the huge majority of farmers, the Rs 4,000 delivered just as BJP seeks another mandate may get a decent bang for the buck.
Bang for the buck may also be amplified by the geographical-electoral binary. Of electorally important states, Uttar Pradesh, Maharashtra, Bihar and Gujarat are ruled by BJP or BJP-plus-allies governments. One can assume that all stops will be pulled out for implementing PM-KISAN in these states.
Now, also assume Opposition-ruled electorally significant states like West Bengal, Karnataka, Madhya Pradesh and Rajasthan, where BJP is also an important player, PM-KISAN is received with indifference or hostility by local governments. Is that a total electoral loss for BJP? Not necessarily. Because of demonstration effect.
For example, if many small farmers in UP get Rs 4,000 before polls, and hardly any kisan in MP does, BJP gets an excellent talking point. Same for Bihar and Bengal, or Maharashtra/Gujarat and Karnataka.
And this is assuming New Delhi won’t just bypass Opposition state governments and transfer money on the basis of some rough and ready central databases. In that case, Opposition non-cooperation may become irrelevant and BJP may get extra credit from beneficiaries. BJP, therefore, has been politically clever in the design and timing of PM-KISAN.
*Food, the most basic of necessities, has to be relatively cheap. *But high output and low prices lower farmers’ income. *More so, because way too many Indians are engaged in inefficient farming.
*So, there is always a tension between low food inflation that benefits all poor/low-income Indians and low farm incomes that hurt farmers, especially small farmers. *An additional complication is that a lot low-income Indians are small farmers.
*Finally, as every well-off urban Indian who doesn’t bother to vote knows, elections are decided by votes of low-income Indians, whether rural or urban.
So, there you have the key dilemma for any government how to keep prices low and farm incomes not-so-low. Reelection chances brighten when both can be delivered.
BJP’s government has kept prices low. But it hasn’t been able to increase farm incomes. So, in terms of the basic political economic binary, BJP’s possible electoral gains from low inflation were confronted with possible electoral losses from low farm income.
That’s the context in which to best understand PM-KISAN, the first central income transfer scheme for farmers — it directly addresses the second element of the basic political economic binary. This binary also makes clear why GoI wasn’t keen on a bigger income transfer scheme. Because that would have increased fiscal deficit considerably, which would have been potentially inflationary. A moderate-income transfer scheme for farmers was the best bet to address both elements of the binary.
Speaking politically, why didn’t the government announce a farm income transfer scheme earlier, as some observers are asking? The argument is that an earlier rollout would have made implementation smoother, and therefore making electoral benefits for BJP more assured. But look at it the other way. BJP didn’t want to spend too much on an income transfer scheme — the deficit-inflation link. Reducing other subsidies and making fiscal space for a larger income scheme was feasible on paper, but politically out of question.
Therefore, an earlier rollout would have distributed sums of money for, say, two or three quarters before elections. And the Opposition, which doesn’t bear fiscal responsibility, would have had plenty of time to critique the cash transferred as too small and would have promised bigger transfers. Small farmers, already used to getting a cash transfer months before polls, may have found the Opposition’s promise more attractive.
A near-election-time rollout, provided implementation is not horribly botched up, is cleverer politically. As ET has reported, a total of Rs 4,000, in two Rs 2,000 tranches, is likely to be transferred to small farmers just before polls. Money in the bank is money in the bank.
So, the Opposition may keep saying the scheme means farmers will get only Rs 17 a day, and promise bigger transfers, but it is less likely to have sufficient campaign time to counter the feel-good factor that may be engendered by Rs 4,000 in a small farmer’s pocket just as polls kick in.
At around 16-17 per cent of annual income from cultivation for the huge majority of farmers, the Rs 4,000 delivered just as BJP seeks another mandate may get a decent bang for the buck.
Bang for the buck may also be amplified by the geographical-electoral binary. Of electorally important states, Uttar Pradesh, Maharashtra, Bihar and Gujarat are ruled by BJP or BJP-plus-allies governments. One can assume that all stops will be pulled out for implementing PM-KISAN in these states.
Now, also assume Opposition-ruled electorally significant states like West Bengal, Karnataka, Madhya Pradesh and Rajasthan, where BJP is also an important player, PM-KISAN is received with indifference or hostility by local governments. Is that a total electoral loss for BJP? Not necessarily. Because of demonstration effect.
For example, if many small farmers in UP get Rs 4,000 before polls, and hardly any kisan in MP does, BJP gets an excellent talking point. Same for Bihar and Bengal, or Maharashtra/Gujarat and Karnataka.
And this is assuming New Delhi won’t just bypass Opposition state governments and transfer money on the basis of some rough and ready central databases. In that case, Opposition non-cooperation may become irrelevant and BJP may get extra credit from beneficiaries. BJP, therefore, has been politically clever in the design and timing of PM-KISAN.