Reluctant Economist

Attack on Agroecology

Agroecology is recognised worldwide as system that enhances fertile landscapes, increases yields, restore soil health and biodiversity, promotes climate resilience and improves farmers well being. Some Industry representatives and scientists are opposing Zero Budget Natural Farming which is developed and publicised by agro-scientist Subhash Palekar has been adopted by Andhra Pardesh state government.

What is Zero Budget Natural Farming?

It is a method of chemical free agriculture drawing from traditional Indian Practices. It was developed in mid 1990s as alternative to Green Revolution methods driven by Chemical fertilisers, Pesticides and Intensive Irrigation. Zero Budget Natural Farming (ZBNF) is an alternative method of agriculture, shifting away from big irrigation projects, farm loan waivers and fertiliser subsidy. Rising cost of external inputs for agriculture produce is leading cause of indebtedness and suicide among farmers while the impact of chemicals on environment and on long term fertility of soil is devastating.

Instead of commercially produced chemical inputs, The ZBNF promotes a mixture of fresh desi cow dung and aged desi cow urine, jaggery, pulse flour, water and soil on farmland. This fermented microbial culture which adds nutrients to the soil. ZBNF is also against the vermicomposting which is a mainstay of typical organic farming. The European Red Wiggler a type of worm is used in this which absorbs toxic metal and which poisons groundwater and soil.

Even the Central Government revised norms for Rashtriya Krishi Vikas Yojana- Remunerative Approaches for Agriculture and Allied Sector Rejuvenation (RKVY-RAFTAAR) a flagship Green Revolution Scheme with an allocation of ₹3745 Cr. this year , and Paramparagat Krishi Vikas Yojana which has an allocation of ₹325 Cr. which is meant to promote organic farming and soil health. Under the revised guidelines, both Centrally Sponsored Scheme now allows States to use their funds in ZBNF promotion, Vedic Farming, Natural Farming and host of other traditional methods.

However, the multi location studies are needed to scientifically validate the long term impact and viability of model before ZBNF can be scaled up and promoted countrywide. Farming in India, as in most other countries is largely under control of powerful lobbies with vested interests and connections to deep pockets. This include Fossil Fuels, Fertilisers and Seed Companies as well as Scientists with funding connections to agribusiness. These lobbies perceive large scale transitions to agroecology as substantial threat to their Influence on Farming Systems.

Flood Plains and Forest Aquifers can provide Natural Mineral Water

Government to provide piped water to all rural households by 2024, under JAL JEEVAN MISSION flagship scheme under Jal Shakti ministry. This is costly as well as futile exercise since over 70% of India’s surface water (rivers & lakes) and groundwater is polluted So, we Indian’s will need reverse osmosis (RO) for home. The only unpolluted sources of water that remain are the waters underlying the floodplains of rivers (for bulk water) and the subterranean natural mineral water underlying forest tracts which must be protected and conserved.

Floodplains can be secured by planting organic food forests or fruit forests which don’t demand much water. As carving out lakes would require digging out vast quantities of sand. This will affect the wetland ecology of floodplains. It will also cause loss of water due to evaporation.

The natural mineral water underlies in forest is of highest international quality. Unpolluted rain falls on the forest, percolates through humus or leaf cover on forest floors which also picks up the soil nutrients and then through underlying rock while picking up minerals. It finally settles in underground aquifers. All our cities in sweep of western and eastern ghats have such forest aquifers. Bengaluru’s Bannerghatta Forest Sanctuary and Mumbai’s Sanjay Gandhi National Park have underground forest aquifers that can supply water for entire population of Bengaluru and Mumubai. So, can Delhi Ridge for Delhi. However, taking more water than nature can recharge every year will be damaging. We need healthy and perennial conservation and use solutions for future.

As of now Himalayan Mineral water sells at ₹45 per litre, Through forest aquifer scheme the government can provide same quality of water at ₹2 – ₹3 per litre. Most importantly, the water levels of floodplain aquifers need to be monitored scrupulously to be well above river water in order to avoid contamination. For these we need to declare the Floodplains and Forest Aquifers as Water sanctuary similar to the Protected Areas like National Parks and Tiger Reserves.

Agriculture and Farming Jobs

The recent corporate tax cut to 22% from 30% this reduction may have positive effect on investment but is not based on big picture. This is remedy for stagnant corporate investment. A large part of corporate sales is driven by rural demand, reflected in reported lay-offs by biscuit manufacturers. Rural pictures matters only because largest numbers are located there and also because of their low incomes. This means future growth of demand for much of industrial production is likely to come from there.

After all how many more cars can urban middle class buy once it already has one? Why rural Incomes are growing so slowly? Because, In the last 9 years since 2008-09, the crop agriculture activity has recorded zero or negative growth. When growth fluctuations include production decline a particular feature emerges which is: Household incurring consumption debt in bad crop year would be repaying the debts in good ones. This implies that consumption does not grow appreciably even in good crop years. But, this does not imply that other factors do not matter like ranging from low export growth to state of banking sector but this does suggest that poor agricultural performance is significant explanation of slack domestic demand. Production decline Unstable agricultural production first lowers the demand for agricultural labour and subsequently it’s supply, showing greater unemployment. It is pointed out investment rate has declined. Private Investment both follows output growth and leads it. When non-agricultural firms observe slow agricultural growth they shrink their investment plans and do not revise until growth improves. So, it is the rural income generation that is the problem.

Long Term Solutions must start with agricultural production, There is crop yield cycle related to annual variations in rainfall but we are now witnessing stagnation. We need expertise of agricultural scientists to confirm what is responsible for this state we cannot rule of ecological factors causing stagnation. Factors encompassing land degradation involving loss of soil moisture and nutrients and drop in water table, leads to scarcity which raises cost of cultivation. All this is directly man made related to over exploitation or abuse. Increasingly erratic rainfall due to climate change induced by human action. Intelligent governance, resource deployment and change in farmers behaviour will need to combine this. Policy focus is disproportionately on tax rate, Ease of doing business and fiscal balance target. Government needs to draw public agricultural institutes and farmer bodies for their views on how to resuscitate the sector. Ecological undertow could defeat our best laid plans for progress.

Why does the State Budgets Matter?

Understanding about state government finances is more important because of two broad reasons. The First is, States now Spend one and half times more than Union government and employ five times more people than centre. This means states have greater role to play in determining India’s GDP than Centre as they are also the bigger employment generators. The Second is, Since 2014-15 States have increasingly borrowed money from the Union government. This trend has serious implications on interest rates charged in the economy, the availability of funds for business to invest in new factories and ability of private sector to employ new labour.

The States borrows more and more money to meet unexpected & unproductive policy goals such as farm loan waivers. Each year borrowing (or deficit) adds to total debt. Paying back this debt depends on state’s ability to raise revenues, If states find difficulty to raise revenues, a rising mountain of debt captured in debt to GDP ratio (is the ratio between a government debt (measured in units of currency) and its gross domestic product (GDP)) could start a vicious cycle wherein states end up paying more and more towards interest payments instead of spending this revenues on creating new assets that provide better education, health and welfare for their residents.

Relief on fiscal deficit target of 3% of GDP is of limited value because most states ended up meeting fiscal deficit target ( The difference between total revenue and total expenditure of the government is termed as fiscal deficit). not by increasing their revenues but by reducing their expenditure and increasingly borrowing from the market. For example the fiscal deficit for all states has breached the 3% of GDP mark in 2016-17. But very next year states reduced fiscal deficit and brought down to 2.4%. But bulk of this cut was achieved by cutting capital expenditure. This cut has adversely affected the loans that state governments provided to power projects, food storage and warehousing. It also hurts states capital allocation for key social and infrastructure sectors.

This reduction in overall size of state budgets likely worsened the economic slowdown. There has been reduction in overall size of the state budget in 2017-18 & 2018-19. This retarding fiscal impulse has coincided with cyclical downswing in domestic economic activity and may inadvertently deepened it. The trouble is states have found it difficult to raise revenues. State revenue prospects are confronted with low tax buoyancies, shrinking revenue autonomy under GST framework. Unrealistic revenue forecasts in budget estimates leave no option for states than expenditure compression.

Towards Colombo Reset : India-Sri Lanka Relations under Rajapaksa

The sudden regime change in Sri Lanka where former President Mahinda Rajapaksa became new Prime Minister as President Maithripala Sirisena’s United People’s Freedom Alliance left the National Unity Government with Prime Minister Ranil Wickremesinghe’s United National Party on issues related to Economy and Security and now Gotabaya Rajapaksa brother of Mahinda Rajapaksa is elected as President.

Gotabaya Rajapaksa and brother Mahinda Rajapaksa who ruled Sri Lanka during 2005-2015 with strong hand as inherently “PRO-CHINA” Although Rajapaksa blamed India for their defeat in 2015 elections but they have sought to make up with Delhi in recent years. South block has rightly put aside it’s reservations about Rajapaksas and has been engaging all major political formations in Sri Lanka. The stage is then ready for a reset in bilateral relations.

The reset involves addressing structural factors which have complicated relationship between Delhi and Colombo. One of them is China question? India is acutely aware that China’s economic and strategic salience in the subcontinent will continue to grow and is not tied to regime leadership in it’s neighbourhood. Consider the case of outgoing coalition led by President Sirisena and PM Wickremesinghe that proves irrelevance of labelling governments in Colombo as “PRO-CHINA” or “PRO-INDIA”. It came to power criticising the Chinese projects in Sri Lanka as financially unsustainable. Two years into power the coalition extended full backing to Chinese projects. The so called “PRO-INDIA” regime that offered China a 99 years lease on Hambantota project and stalled key projects of interest to Delhi. So, in any case Delhi can’t expect it’s neighbours to shut down economic and commercial engagement with Beijing. But Delhi will be right to ask Colombo not to take steps with Beijing that threaten India’s Security.

New Lankan leadership’s eagerness to signal goodwill towards India says that China is “Trade Partner” while India is “Close Relative”. In South Asian context Trade Partners may come and go but relatives are for keeps. As world rediscovers the geopolitical value of Sri Lanka at the heart of Indo-Pacific, Colombo has huge opportunities to leverage it’s location for national benefit. The prudent and important part of that strategy would be to avoid provoking India. Delhi would also be wise mindful of Colombo’s security concerns and find ways to develop long term strategic cooperation with Lanka.

Delhi needs to invest some political capital in resolving problems such as long standing dispute over fisheries. Beyond it’s objection to China’s BRI Projects, Delhi either alone or in partnership with like minded countries like Japan should offer sustainable terms for infrastructure development. Delhi also needs to contribute more to the development of Colombo’s defence and counter terror capabilities. The second structural factor shaping India’s relations with Sri Lanka is the Tamil question. It’s involvement in Lanka’s tragic Civil war made Delhi learnt the dangers of being drawn too deep into domestic conflicts of neighbouring countries. Successive governments in Delhi from 1989-2014 to balance pulls and pressure from Chennai and Colombo have struggled a lot. The strong mandate in 2014 given to the BJP provides greater room to manage competing imperatives on Lanka Policy. But, Tamil question has not gone away. If new government in Colombo can advance reconciliation with Tamil minority it will be easier for PM Narendra Modi to strengthen ties with Gotabaya Government. But, Tamil issue is no longer bilateral even the western powers expressed concern about war crimes in military campaign against LTTE and need to bring responsible to book. The Rajapaksa said they will not bend before foreign pressure. Too much heat from west will increase China’s leverage in Colombo. In order to reset it’s relations with Lanka, Delhi must try to encourage reconciliation with Lanka and across Palk Strait in Tamil Nadu and must use it’s diplomacy in the world so Lankan Government may not be pressured from Foreign powers.