The Election Commission of Pakistan has stopped the operation of certain provisions of the Kissan Package, announced with much fanfare by the Prime Minister, accepting the argument of the Pakistan Tehrik-e-Insaf that its announcement after the election schedule was announced by the Commission for both the by-elections to the National Assembly seats that resulted from PTI election petitions, and local council elections in Punjab and Sind.

Though clearly intended for political patronage, the Kissan Package also came in the wake of a farmers’ protest, which had involved blockading the Punjab Assembly. It was seen as an admission that something had to be done about a fall in farm incomes. It was not purely the agricultural lobby at work, but an acceptance of the fact that commodity prices generally had declined worldwide, and was leading to price declines. While these declines meant that inflation was coming under control, it also meant that there were not going to be very good prices for crops.

Farmers in Pakistan have the important cushion of not paying any income tax. This is protected by the large agriculturist lobby in all assemblies, and in all parties. No matter who is in power, agricultural incomes cannot be taxed. Now that farmers face more distress, it is likely that the pressure to tax agricultural incomes will not increase, but actually decrease. However, this tax-exempt status should not disguise the fact that there was a real decline in farmers’ incomes, leading to the sort of real suffering that led to the parking of tractors outside the Punjab Assembly. This was in perhaps conscious imitation of Indian farmers’ protest, which included one farmer committing suicide in Delhi in April. Though Pakistani farmers have not been committing suicide as much as Indian (there were 13,754 suicides in 2014 in India), mainly because Islam sets up very strong mental obstacles against suicide, while Hinduism glorifies it under particular circumstances, they have also been languishing under similar problems.

Another problem faced by farmers has been one of anticipation, rather than of immediate application. That is the collapse of the real estate market. Like urban land, agricultural land has also seen a falling-off in demand, and the value of agricultural land, which was not just as of a producer of crops, but also as a potential houser of people, has declined. It is true that there will always be a bull market in sectors where population is growing, but that also means that other industries will also be in a bull market situation, like education, health– and food. Agricultural use is in conflict with housing, that should mean an additional pressure on land prices. However, that does not seem the case.

One conclusion is that there is little corruption money floating around. Not only does real estate, including agricultural land, represent a safe investment ordinarily, but it also represents good value for money for the corrupt. It is not certain whether or not this is a result of corruption proceeds being an important source of investment, but the real estate market is still primarily a cash market. As corruption money is usually in cash, the real estate market is usually suitable for this. One damper on real estate has been the availability of foreign exchange as an investment avenue. As foreign exchange remains liquid, and as it might seem a good hedge against inflation, while remaining easily accessible, and suitably anonymous, money has been diverted abroad.

Another source of investment for the real estate market has been foreign remittances. The relationship of Pakistanis going abroad as labour, and then the real estate investment boom, is worth studying. Because of all the above reasons, the real estate market has never seen a bust, as investors or inheritors prefer not to sell, rather than to sell at a loss or below expectations. Another effect of the cash market is that there is little involvement of the banking sector. Prima facie, it would seem that someone should borrow from the banks, buy either land or houses, sell at a huge profit, pay both interest and principal, and keep the difference. In fact, that is what happened during the US crisis. What if there is a bust, and it is not possible to service that loan? The borrower defaults, and if there are enough defaults, so does the bank. This also happened in the earlier East Asian crisis. At a certain level, Pakistan has been lucky that banks have got limited exposure to real estate, though there was considerable effort at the height of the real estate boom to get them into the sector.

One result is that a bust is not reflected in falling prices, but in fewer transactions, and the failure of prices to rise. That has a negative effect on owners of agricultural land, for it means that a large asset, frequently the main asset, becomes illiquid, to the point of becoming non-convertible. The farmer, even if he intends to hold on to his land, is aware of its market value. Apart from the social advantages perceived of owning land, there is also an economic value. Then there is the actual return, which is reflected in the crop sales. The collapse of commodity values has taken place at a time when land values are no longer increasing, and where land is increasingly less convertible.

One thing missing from the picture is the moneylender. The last time there was this much distress among the farming community was during the Great Depression of the 1930s. That was a period which saw a widespread debt crisis in the area that is now Pakistan, with farmers mired in debt to moneylenders. They had put up their lands as security, and the moneylenders, while outside the banking system, had provided them money for a number of reasons. The Raj granted self-government, and the ‘peasant interest’ used the only advantage it had, numbers, to take power and legislate the debt crisis out of existence. The Raj, which saw the moneylenders as Congress supporters, acquiesced in this. A similar debt crisis does not exist, though farmers have generally taken out loans from the Zarai Taraqiyati Bank Ltd, as well as other commercial banks.

The current development model is running into trouble, because it depends on agricultural surpluses being generated for investment in industry. Without such surpluses, industrial investment resources will not be easily obtained. Now industry faces a debt burden, and so does the country. The Kissan Package’s operation may have been postponed, but its being prepared shows an awareness that the whole country could be brought down like a pack of cards. It is for the government to ensure that the Package brings genuine relief to farmers, and is not used as a cash cow to be milked by a select, powerful, few. It should not be seen by the government merely as a by-election issue, but as the programme through which it could consolidate its position in the rural heartland.