Where welfare state policies are in need

In the context of liberalisation and economic reforms, opinion as well as policy has veered round to lowering government intervention in the spheres of labour, markets, procurement, prices etc. But in a country or society beset with inequality, injustice and built-in disabilities to compete in a level-playing field (in the form of discrimination based on caste, religion, region, language and sex), the government intervention for the benefit of the disadvantaged sections, also called dirigisme/directed or welfare state policies, are abidingly, largely consensually, held necessary.

The policy of minimum support prices has to be viewed in the context of a growing and large proportion of landless labour and marginal land holders on the one hand, and huge market operators with potentially monopolistic resources, to purchase, to stock and sell when the market prices are the most remunerative.

The poor, amidst constantly growing inequality, are under the potential depredations of these monopoly operators and ultimately will get only the lowest relative prices and remain mired in poverty, socio-economic stagnation and helplessness, a travesty of justice and democracy intentions and welfare state ideals.

The inequality/disability scenario is typified by worsening land holding patterns. Over the years, holdings are hopelessly fragmenting, each holding is less than two hectares; these are 86.1% of total holdings and are 12.56 crore households. They are becoming progressively unviable as productive units to more satisfactorily yield the much needed produce, universal nutrition, employment and cash income.

And on the other hand, these holdings are inevitable as sources of the sense of security, dignity, initiative and of agency; without this holding, (this is often sought to be jeopardised/purchased/facilitated/surrendered/sold to non-agricultural urban purposes for one time compensation), individual farmers get consigned to penury, indignity and beggarly sub-human status.

A more poignant aspect of this inequality scenario is the lack of access and receipt of bank loans by the poor distressed agriculturists. Policy-wise, India is increasing allocation of loans from banks to the agricultural sector every year significantly, and is a decades’ old feature. In 2011-12, allocation was Rs 4.75 lakh crore and steadily it increased to Rs 15 lakh crore in 2020-21 with an allocated subsidy of Rs 21,175 crore. During these 10 years, most of these loans have gone to the rich; not even 20% of the poor farmers have accessed these loans.

The RBI has expressed concern about this deficiency in access by the poor, they are said to have received less than 15% of disbursements. The share is 79% for the class of the largest land holding class. This skewed loan access has resulted in another systemic misfortune; less and less additional capital investment under private (and government) aegis has gone into agriculture and instead has gone into urban rentier property with scope for capital gains; all this is by the rural rich who are on their city-ward exodus, making the villages deprived of youth, skills and physical and financial capital.

Exodus of capital

Evidence for this increasing rural-urban exodus of capital is in stagnant incomes or low increases in income among small farmers and rural labour, manifest increase in numbers and kinds of poverty and socio-economic inequality and insecurity. Coming to statistics, a 2019 working group of the RBI has found inconsistencies vis-a-vis agricultural credit disbursal in several states.

In these states, disbursed farm sector loans were found to be far in excess of their respective state agricultural GDP: Kerala – 326%, Andhra Pradesh—254%, Tamil Nadu—245%, Punjab—231%, Telengana—245%. Also, one reason behind this diversion is that this subsidised agricultural credit to big farmers at a 4-7% rate is being arbitrage lent to small and distressed farmers at rates up to 36%.

Thus, inequality phenomenon is being bolstered by government/bank loans to (richer) agriculturists. Thus, criteria-based inexorability in government policies and schemes may not yield the intended results. Dirigisme policies and direct, focused attack on poverty have to continue as an integral part of democratic welfare state governance, despite the avowed and hankered after merits or need for economic reforms/liberalisation.

As a necessary alternative, there is need for income transfers favouring small land holders depending on the size of their holdings (a sort of negative land holding tax) and active agricultural production and encouragement/delivery of manifold grains, superior foods and products. These direct transfers will pave the way for stability of incomes and social security, and skill improvement and education of succeeding generations of farmer families.

Obviously, dirigisme administration has to be imaginative and manifold; the departments and officials in charge of this dirigisme have to be both technically and attitudinally trained and skilled; and have to be suitably drawn from education, health, PWD, departments of employment, training and labour. The tradition of cursorily adding on welfare administration to the existing straitjacket specialised/routine departments have to give way to emphasis on the brass tacks of development administration, training as well as funding.

(The writer is former Professor, Maharaja’s College, Mysuru)