1 Budget, 9 Elections: Big Year To Test PM Modi, Says Foreign Media

PM Modi gave the highest ever allocation to a rural job guarantee program in the current year ending March, and spent more on providing houses, drinking water and building rural roads.

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1 Budget, 9 Elections: Big Year To Test PM Modi, Says Foreign Media

Rural areas are home to about 68 per cent of the country's 1.3 billion people


Highlights

  1. PM Modi has promised to double farmers' income by 2022
  2. Unemployment rates in rural areas increased in 2015-16 from two years ago
  3. Rural wage hikes haven't been enough to cover consumption requirements
Normally a field of lush green wheat stalks would lift Kishan Singh's spirits. Yet weak prices mean even a good crop this year may not stop debt collectors from kicking him off his land in northern India.

More than 60 people in Dhamaka, a village of about 230 families some 80 kilometers (50 miles) from Delhi, have received notices threatening to auction their fields. Singh urgently wants Prime Minister Narendra Modi's government to provide debt relief, better prices for his crops and jobs for his sons when it unveils the annual fiscal budget on February 1.
farm income bloomberg"I don't know how to escape from this crisis," Mr Singh, 62, said this month while showing the notice to immediately repay 247,296 rupees ($3,886) he owes to the bank. While he previously voted for PM Modi, he's unsure who will get his vote in the next national poll due early next year.

Time is running out for PM Modi to shore up the support of rural voters who underpinned his rise to power in 2014, when he won India's biggest mandate in three decades. The budget will be the last opportunity for him to announce significant fiscal measures that could win back villagers like Mr Singh.

"Governments that choose to focus on urban voters and urban issues have rarely met success at the ballot box, and I would expect the budget will mark a shift to issues relevant to farmers," said Richard Rossow, who holds the Wadhwani Chair in US-India Policy Studies at the Washington-based Center for Strategic and International Studies. "There are few political risks to a renewed focus on rural voters."

Rising discontent in rural areas and unrest among farmers is pressuring PM Modi to spend more on the countryside -- home to about 68 percent of India's 1.3 billion people and a key voting bloc in the world's largest democracy. PM Modi has promised to increase the living standards of villagers and double farmers' income by 2022.
rural haryana bloomberg

Clock's Ticking

PM Modi sensed the anger in December elections in his home state of Gujarat, as his Bharatiya Janata Party failed to reclaim its rural seats. He's facing a further eight state polls this year against political groups including the main opposition Congress Party, which has seen recent success in harnessing the anger of villagers.
rural haryana bloomberg

"He got a bit of a shock from Gujarat. He realizes you can't just rely on urban sector," said Raghbendra Jha, an economics professor at the Australian National University. PM Modi is expected to use the budget to push for more farm insurance, expand cold storage and improve logistics from production to marketing, he said.

Finance Minister Arun Jaitley this month called the agriculture sector the government's top priority, noting the country's economic growth is not "justifiable and equitable."
rural spending bloomberg
Beyond the rural sector, PM Modi faces pressure to put more money in the pockets of ordinary Indians by widening tax brackets and offering more exemptions. But concerns on fiscal slippage could limit his choices.

While higher spending on the hinterlands may boost economic growth from a projected 6.5 percent, it also risks stoking inflation and derailing PM Modi's budget deficit target of 3 percent of gross domestic product for the next fiscal year.

Conscious about being seen as a government that favors the business elite over the poor, PM Modi has launched several schemes for rural people and unemployed youth. Still, agricultural growth was less than 1 percent because of back-to-back droughts in 2014 and 2015, as well as the failure of increasing crop yields to translate to higher incomes.

Unemployment rates in rural areas increased in 2015-16 from two years ago, while outstanding agricultural loans swelled and the number of farmers committing suicide rose 42 percent in 2015 from a year earlier.

Rural wage increases haven't been enough to cover consumption requirements. And although a normal monsoon in 2016-2017 helped produce bumper harvests, a jump in supply has suppressed prices and farmers have struggled to make a profit.

PM Modi has already started paying more attention to rural India. He gave the highest ever allocation to MNREGA, the rural job guarantee program in the current year ending March, and spent more on providing houses, drinking water and building rural roads. The government also raised minimum support prices, pushed for crop insurance, integrated agriculture markets and provided more bank loans to farmers.

Still, in many rural areas like Dhamaka, the initiatives haven't been enough to lessen the distress.

Earlier this month, villagers stood in a queue to purchase drinking water because their ground water was contaminated. The water supply from a nearby canal had been stopped, making it difficult to irrigate fields. In the last four years, only six of nearly 300 young people in the village have found jobs outside of agriculture.

Kishan Singh faces a constant battle to feed his 17-member family as prices of his farm produce have fallen. Despite the hardship, Mr Singh has provided education to four of his boys and two have also received government-sponsored skills training. So far none have a job.

"After providing education and skills, if none of my children are getting employment, then where is the development?" asked Mr Singh. "Government schemes do not reach to us."


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