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Resource centre on India's rural distress
 
 

Hidden figures: The numbers show absolute deterioration in the condition of farmers -Prabhat Patnaik
-The Telegraph

Their demand for assured remunerative prices, therefore, is perfectly justified

There are occasions when one suddenly becomes aware not just of the inadequacy of economic concepts for understanding reality but even of their obfuscating role. One such occasion was the recent kisan march in Delhi. The peasants have been facing distress for long, which has resulted in more than three lakh suicides over the last two-and-a-half decades, in growing indebtedness relieved only by occasional debt-waivers, and in a mass exodus out of the agricultural sector which has swollen the reserve army of labour in towns.

Now, a commonly used indicator in the economics of changes in peasant well-being is the movement in the ‘net barter terms of trade between agriculture and industry’, which is the movement in the ratio of agricultural to industrial prices compared to some base year. A movement of this ratio against agriculture is supposed to indicate a worsening in the condition of the agriculturists compared to the base year, while a movement in favour is supposed to indicate the opposite.

It so happens, however, that an index of the ratio of these two prices which is readily available in official statistics does not show any decline in the agricultural prices relative to the industrial prices. This appears to contradict claims of peasant distress. Indeed, some have argued on the basis of these statistics that the extent and depth of peasant distress is exaggerated. True, they say, the poor peasants and agricultural labourers, who are at the bottom of the heap, may have seen a worsening in their lot, but the richer peasants are unlikely to have done so. It follows that increasing the procurement prices as demanded by the kisan march would only result in a squeeze on the net buyers of foodgrains, who also include the rural poor, just for a further enrichment of the better-off peasants and landlords, who have not been subject to distress anyway.

This argument, however, far from proving the absence of peasant distress, only proves the inadequacy of looking at the terms of trade movement for assessing peasant distress. This inadequacy arises for several reasons. First, the agricultural price that is used for measuring the terms of trade does not refer to the price that the peasants actually get. In fact, no information is available in any official source about the farm-gate price, or the price that peasants actually get. We have official data on the minimum support price and procurement price declared by the government, and about wholesale prices, apart from the various consumer price indices, but not about producers’ prices; and the crude measure of the terms of trade given in official sources is based on wholesale prices. Since one of the main complaints of the peasants aired at the kisan rally was that the price they get is only a fraction of the wholesale price, to deny their distress by citing a measure based on the wholesale price itself is absurd.

Second, the industrial price that appears in the crude terms of trade calculation in official statistics is also the wholesale price, which differs from the retail price that the peasants have to pay when they buy industrial goods. Third, the basket of goods which are covered in the calculation of the wholesale price index for industry is not the same as the basket of goods that the peasants buy, either as inputs or for consumption. And finally, industrial goods are not the only ones that the peasants buy from outside; in fact, a very important part of their consumption basket consists of services such as healthcare and the education of their children, and the prices for these services are not covered in any terms of trade calculations.

Inter-sectoral terms of trade statistics, therefore, are totally irrelevant for assessing peasant distress. The peasants buy two kinds of goods, inputs and consumption goods, and one way of getting an idea of peasants’ condition is to take official statistics on the value added in the agricultural sector, which is the excess of the total value of the output it produces over the value of the current inputs it uses. Since all incomes derived from agriculture have their origin in the value added in this sector, if we deflate the per capita value added figures by the consumer price index for rural India, which we can get from official statistics, then we can get a better idea of movements in peasants’ real incomes than what terms of trade figures can possibly give.

Such an exercise shows that the per capita real income of the agriculture-dependent population (whose ratio to the total population is, quite plausibly, assumed to remain unchanged over the brief time-period covered by the exercise) declined slightly between 2013-14, on the eve of the present government’s coming to power, and 2016-17, the latest year for which we can do these calculations.

Three additional factors have to be borne in mind here. First, the slight decline we noted is for the agriculture-dependent population as a whole. If we assume, quite reasonably, that within agriculture the landlords and the capitalist farmers have not witnessed any decline in their per capita real income, then it follows that the decline must have been quite noticeable for the peasants and agricultural labourers taken together.

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