India's rural distress just went from bad to worse
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- The latest estimates from the government portend a contraction in agricultural
- Worst year for farmers' pricing power in a decade, according to a report
consumptionand Modi's political capital likely to be hit
More than three years ago Indian Prime Minister Narendra Modi promised that he would double the income of the country's farmers by 2022. As his five-year tenure nears an end, the
The latest set of growth estimates from the government are set to discolor
"The most striking fact is that
The estimate from India's chief statistician has pegged agricultural
In effect, Indian farmers are looking at a second straight year of below-par performance. That combined with
Cost of the crisis
The concern for the Indian government is both economic and political.
Farmers in financial distress will consume even less and that will further squeeze overall economic growth, which, at this point, is heavily dependent on services and consumption.
Both manufacturing and fresh investments have been uninspiring so far. New projects fell to an appalling 14-year low in December 2018. Capital investments have remained the government's prerogative as private investors shied away from betting big bucks.
The slowing rural consumption has been visible in the recent slowdown in two-wheeler sales and budget cars, which derive traction mainly from the affordability for Indians in smaller cities and villages.
High interest rates and soaring fuel prices in the recent past have also dented people's purchasing power while their ability to afford increase prices has been limited, as reflected by the latest estimates.
Additionally, Indian government's attempts to fix the narrative with recent hikes in
All of this has led to growing resentment among rural voters; something that was a crucial factor in the ruling Bharatiya Janata Party losing three state elections in late 2018. Dearth of private investments and the consequent
As of Tuesday (January 8), farmers organisation have joined hands with 150 million workers who have gone on a 2-day
Modi has five months from now to calm irate voters before he faces the national test in May 2019. After all, 67% of India's population does not live in cities.