The Agrarian Approach to Economic Crisis

The rain has stopped. You step out of home to run a few errands. On the way, you find ₹500 note lying on
the ground. You pick it up and put it in your trouser pocket, thinking you’ll donate it to the local charity.
But you give in to temptation as soon as you cross the local book shop and buy the latest bestseller for
₹500. The bookseller is an alcoholic and uses the money to buy his stock of alcohol for the day. The
liquor shop owner takes the ₹500 and walks across to the local cinema and buys the ticket for the latest
movie, featuring his favorite heroine. He also buys some atrociously priced popcorn and a soft drink. The
cinema owner has to go attend a wedding at the other end of the town and he gives that very ₹500 note to
a taxi driver, given that his driver is on leave.

What’s happened here? The movement of the initial ₹500 has made
everyone better off. The initial ₹500 has been spent four times and has generated ₹2,000 worth of
economic activity. In that sense, the first ₹500 contributed ₹2,000 to the Indian gross domestic product
(GDP). The same wouldn’t have happened if you had taken the ₹500 and deposited it in the bank or
simply kept it in your pocket.

GDP, in the conventional sense of the term, is defined as the “measure of

all the goods and services produced inside a country". Nevertheless, as John Lanchester writes in ‘How
to Speak Money’: “GDP can be thought of as a measure not so much of size… It measures the movement
of money through and around the economy; it measures activity." The example shared above (which is
inspired from a similar example in Lanchester’s book) shows precisely how economic activity adds to the
GDP. One man’s spending is after all another man’s income, and the income can be spent again. So, the
cycle is supposed to work and add to the economic activity and the GDP. (Kaul,2019)

Therefore the Economic Slowdown can be defined as:

"a significant decline in economic activity spread across the economy, lasting more than a few months,
normally visible in real GDP, real income, employment, industrial production, and wholesale-retail
sales" (National Bureau of Economic Research,2007)

And therefore the ultimate cause of Indian Economic Slowdown lies in ‘Low Demand’.

Consumption – Major Matrix of Indian Economy

The rural sector (including agriculture) is being seen as a potential source of domestic demand, a
recognition that is even shaping the marketing strategies of entrepreneurs wishing to widen the demand
for goods and services. Agriculture is the generator of agricultural income that enables rural demand for
industrial products to take place. Empirical tests show that a unit increase in agricultural output would
have a positive effect on both industrial production and national income. Importance of agriculture in the
national economy is indicated by many facts. For example, agriculture is the main support for India’s
transport system, since railways and roadways secure bulk of their business from the movement of
agricultural goods. Internal trade is mostly in agricultural products. Agricultural growth has direct impact
on poverty eradication, containing inflation, raising agricultural wages and employment generation
(Kapila,2014-15)
We can blame demonetization and increased curbs on use of cash, since a significant portion of
agricultural transactions happen in cash. It accentuated other problems that have not been fixed in a very
long time (Shashikant,2019)

But what makes agriculture vital in present months of economic slowdown?

It is the fact that agricultural population is the major consumer of the industrial products. For instance,

Tractor sales: A good indicator of rural demand, tractor sales during April to June 2019, fell by 14.1%,
the highest fall in nearly four years.

Rural household consumption slumped to a seven-year low in the September quarter, in a sign that the
prolonged agrarian distress and near-stagnant rural incomes have eroded demand for consumer goods.
Consumption of packaged consumer goods by rural households also grew at a slower pace than in urban
areas for the first time in seven years, market researcher Nielsen said.

It is not like the need for consumption has decreased. Need has always been there. So, instead of focusing
on creating need, put the incentives to meet need.

And since we know that the consumption expenditure is directly linked to income, especially for the
lower and middle income working and the rural population forming the bulk of population of India, the
imperative is to improve their wages to spur consumption demand (Mohanty,2019).

Now moving forward we come up the Government's response to wages:-

The Narendra Modi government also believes a boost to farm export is a sure-shot way to help double
farmers’ income by 2022. Its agriculture export policy, released nine months ago, lays out the economics.
Once a farm product is exported at scale, it reduces a glut in the market, thereby checking a drop in prices
and allowing farmers to realise better prices for their produce. Also, cultivation of export-quality products
fetch better prices for farmers.

“There will always be a big price difference between Alphonso mangoes selling in New York and in
Mumbai. Won’t a farmer whose alphonso is sold in New York earn more?” says Paban Kumar Borthakur,
who heads the Agricultural and Processed Food Products Export Development Authority, a commerce
ministry body that facilities half of India’s agricultural exports (Sharma,2019).

But to conclude, there stands a need to change the matrics of development. That is rather than talking of
percentages, talk about the number of farmers who have been made sustainable. And clarify target
farmers under a scheme to solve the problems . No more generalizations…..