Rural Poor & Middle Class: Economy stumped despite sops

Rural Poor & Middle Class: Economy stumped despite sops

The NDA government is seized of the crucial slowdown. Finance Minister Nirmala Sitharaman accepts it but nobody has fathomed its depth. It is not easy to find out the causes of the myriad problem in the world’s most populous country with over one billion people.

The government has unleashed 431 programmes and is adding more. It cannot be perceived to be negligent. Despite that though the nation has not done any structured poverty studies since 2009 Tendulkar studies. The recent analysis of NSO data by Mint newspaper suggest the rural poverty has shot up by 4 per cent from official estimates of 26 per cent in 2011-12 to 30 per cent in 2017-18. The most hit States are Maharashtra, Bihar, Jharkhand and Odisha. The phenomenon needs to be studied as it just does not include poor States but also the most prosperous Maharashtra.

A significant concern is the falling consumer expenditure as per the National Statistical Office (NSO) Household Survey. The dip in consumer spending in 2017-18 as compared to six years earlier speaks volumes. The 10 per cent decline in food consumption in rural areas should be a grave indicator. This is in sync with the 8.8 per cent fall in consumer spending in villages.

The introduction of MNREGA or MUDRA and several other welfare schemes apparently have not yielded the desired results. The cut-off year — next to the note-ban — is important. It is perceived to have hit the beginning of an upturn in lifestyle and overall improvement. Studies are yet to come out how cash shortage has choked the well-being of the people or not. As per the general perception lack of cash has hit rural home savings and transactions.

It is still not clear if the cash flow has normalised despite the Reserve Bank of India saying that currency circulation is higher than the pre-note-ban era. It has increased from estimated Rs 15.44 lakh crore on November 8, 2016 to Rs 21.10 lakh crore on March 31, 2019. It is not clear if it has replenished the lost wealth of the rural people.

The situation would be perceived to be more serious if it has no linkage to the note-ban and its ills. It is yet to be found out what has slowed down the average rural homes, largely dependent on agriculture. Is it because they are too dependent on government procurement and officially announced support prices? If the latest trend in Rajasthan is taken as an indicator, it may be. Farmers in Rajasthan are again shifting to wheat cultivation instead of oilseeds and pulses as official prices of wheat are more lucrative.

This is contrary to the government objective of creating a viable and competitive market. So State controlled procurement remains the mainstay of rural farmers. Since the rural economy is dependent on the farmer’s well-being, even small change in his fortune hits the rural workers.

It is a complex issue and needs intelligent solution. It also needs to find out why the RBI says that most MUDRA loans are turning into Non-performing assets (NPA) crisis.
This is despite record budgetary allocation for agriculture and farmer welfare under the NDA government. Compared to the previous government’s tenure of 2009 to 2014 which saw an allocation of Rs 1,21,082 crore, Prime Minister Narendra Modi’s government has allocated Rs 2,11,694 crore in the period 2014-19. This is almost double.

Despite this if the conditions in the rural areas are not improving it calls for serious deliberations.
It also needs to be discussed in the light of the recent Rahul Bajaj jibe of business “fears” of free discussion. In 1993, post liberalisation and Harshad Mehta stock scam too, he voiced business “concerns”. Home Minister Amit Shah aptly has stated that the government would have to improve the atmosphere.

India’s growth story is not merely that of business and the rural poor. There is yet another aspect. During the past few years the middle class is stated to have occupied a significant place in creating consumer demand. Of late, this also has been hit. The recent slowdown that sees falling sales of cars and other goods has a relation to it.

According to 2015 Pew Research Centre report, those with a per capita income between $10 and $20 (Rs 70 to 1400) a day belong to the global middle class. In India, they are hit by almost 9 per cent unemployment and the rising trend of the pink slips. Many in this class are on the edge of poverty.

Blaming the government is a normal passion. The Opposition has not offered anything new except clichéd denigration of the government. Even the Left parties, earlier known to have scholars studying the economic changes, have not offered a suggestion. The ageing leaders in Congress, NCP and others definitely are in their grooves and not expected to come out with something new.

The transformed Planning Commission in NITI Ayog has not come out with a road map or new suggestion. The Ayog is handpicked to have scholars on its board. It would be too much to say that it does not have talent but it needs introspection why it is lagging or what is preventing it. The countrymen expect it not only to lead but also perceive it as a thinkers’ forum.

Prime Minister Modi is working for a $5 trillion economy. For the poor it does not mean much as it is not trickling down to him. The crisis is said to be global. But it requires a local solution.

The government must not feel shy or treat it as prestige issue. It calls for a national discussion to find the path. Economists alone cannot solve it. There has to be political minds to ponder over suggestions of economists, farmers, scientists, and other thinkers. Jobs have to be generated. The farmer has to get his price. Education has to be rid of stress on non-research PhDs. Industry has to feel reassured and market has to thrive. Rupee has to come out of the slippery path.

It is a big challenge. Trends need deep deliberations for diagnosis of the symptoms and course correction. It has to go beyond rhetoric to come out of the morass. India can and must show the path to the world.



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Rural Poor & Middle Class: Economy stumped despite sops