May 3, 2019 / 9:44 AM / 19 days ago

India's rural pain goes beyond farmers, and it may be a problem for Modi

ZADSHI VILLAGE, India (Reuters) - Three years ago, brick mason Pundlik Bhandekar was always busy as farmers in his tiny hamlet in Maharashtra commissioned new houses and nearby towns were undergoing rapid urbanisation. Now, as the rural economy sinks and the pace of construction slows, Bhandekar is struggling to get work.

Gulab Chalakh, a farmer, poses in front of his harvested cotton in Zadshi village in Maharashtra, March 31, 2019. REUTERS/Rajendra Jadhav/Files

“I used to get a new construction project before I could even finish one. People would come to my house to check when I would be free to work for them,” said Bhandekar, as he sat with friends under the shade of a tree on a hot afternoon.

From daily wage workers such as masons, to barbers and grocery shop owners - just about everyone in Zadshi village, some 720 km (450 miles) from India’s financial hub Mumbai, says a drop in farm incomes has dented their livelihoods.

Their woes are symptomatic of a wider problem across India, where more than half of the country’s 1.3 billion people are dependent on agriculture for their livelihoods, as the slowdown in the rural economy is felt in the dampening sales of consumer goods, especially the biggest such as car and motorbike sales.

The slowdown has also dented Prime Minister Narendra Modi’s popularity in the hinterland that propelled him to power in 2014, and political strategists say it may mean he struggles to form a majority after voting in a staggered general election that began on April 11 concludes on May 19.

Zadshi has been almost entirely dependent on annual cotton and soybean crops that, according to farmers, have given lacklustre returns in the past few years due to a dip in prices, droughts and pest attacks.

And as incomes have dropped, farmers have cut back on big-ticket spending such as building new houses, digging wells or laying water pipelines, squeezing employment opportunities for people such as Bhandkekar.

“No one is interested in hiring us. We are ready to work even at 250 rupees ($3.60) per day,” said Bhandekar, who charged 300 rupees a day when work was steady, but now gets work only once or twice in a fortnight.

LOWER WAGES, LESS SPENDING

Economic data reflects the plight of farmers and daily wage workers.

Retail food inflation in the fiscal year ended on March 31 fell to 0.74 percent, even as core inflation stood at 5.2 percent, according to Bank of America Merrill Lynch Research, eroding the spending power of farmers.

Inflation adjusted wage growth for workers involved in crop sowing was just 0.6 percent 2018/19 compared with 6.5 percent in 2013/14.

The value of farm produce at constant prices grew 15 percent in the past five years, compared with 23 percent in the previous five, while the manufacturing sector grew 40 percent, against 32.6 percent in the previous five years, government data shows.

“Lower rural wages will result in lesser spending, which in turn will reduce demand for goods and services that are part of the rural basket,” Rupa Rege Nitsure, group chief economist at L&T Finance Holdings in Mumbai, told Reuters.

The government needs to spend more in rural areas to generate employment and boost incomes, Nitsure said.

Modi’s Hindu nationalist government did introduce various support schemes in the past six months, such as a 6,000 rupees yearly handout to small farmers.

The main opposition Congress party has gone much further with its pledges though, saying it would introduce a basic minimum income, where the country’s poorest families would get 72,000 rupees annually, benefiting some 250 million people.

RISING UNEMPLOYMENT

In Zadshi, as the mercury touched a searing 40 degrees Celsius(104F), a group of villagers gathered under the trees lining a dusty road and began chatting about everything from crop prices to politics.

“What else we can do? Had work been available in urban areas, we could have moved there but even in the cities construction has slowed down,” said Amol Sontakke, an unskilled labourer who works in farms and on construction sites.

Job opportunities have slowed even in urban areas and India’s unemployment rate touched 7.2 percent in February, the highest since September 2016, according to data compiled by the Centre for Monitoring Indian Economy (CMIE). Official data is unavailable for recent periods.

The mood in Zadshi was glum. While four dozen villagers interviewed by Reuters were hopeful that if there was a good monsoon this year it could improve farm incomes, they’ve been cutting back on spending in the meantime.

“People are thinking twice before buying new clothes during festivals,” said Avinash Gaurkar, a farmer currently doubling up as a part-time driver. “Buying big-ticket items such as motorcycles or refrigerators is out of the question.”

Two years ago Gaurkar began building a house, but had to give up midway as his five-acre farm could not generate the money needed, he said, pointing towards a half-finished structure without doors.

In 2018, just four villagers bought new motorbikes compared with as many as 10 a year about four years ago, said cotton farmer Raju Kohale, whose son is sitting at home unemployed after graduating as an engineer.

“Poor monsoon or lower prices, something or the other has been hurting us in the past few years,” Kohale said.

MODI AGAIN?

In the 2014 general election, most in Zadshi voted for Modi, but the farmers’ distress has swayed many towards the opposition Congress party. That was clear from Reuters’ interviews with 48 villagers, who cast their ballots last month.

Farmers are at the bottom of the Modi administration’s priority list, said labourer Sagar Bahalavi.

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“They are building big roads to connect metros and calling it development. How is that useful for us?” he said.

Some, though, want to give Modi a second chance.

“Modi’s intentions are good, it’s the bureaucratic system that is not supporting him,” said Gulab Chalakh, who owns a 20-acre farm and is among the richest in the village. “We should give him another chance.”

Reporting by Rajendra Jadhav; Additional reporting by Manoj Kumar in New Delhi; Editing by Martin Howell and Alex Richardson

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