Doubling Farmers’ Income by 2022: Where do we stand?

Doubling Farmers’ Income by 2022: Where do we stand?

Prof. (Dr.) M. K. Ghadoliya*

ABSTRACT

Many schemes have been launched to reduce farmers’ distress yet the conditions of farmers have not shown significant improvement. It is therefore necessary to assess the new slogan and scheme of the government to Double Farmers’ Income (DFI) by 2022. The Economic theory gives two distinct approaches of growth i.e. Balanced Growth Vs Unbalanced Growth. Our planners chose the second option and argued that agriculture is in very poor stage so it cannot be developed as leading sector of the economy. We gave much emphasis on basic and heavy industries sector arguing that once industrial sector develops it will benefit agriculture through it backward and forward linkages. The emphasis on agriculture in third five year plan was a necessity as we were at the starvation stage but even then terms of trade always remained against agriculture.

The present government has for the first time took a paradigm shift and focused on doubling farmers’ income and his welfare from agricultural growth. Agriculture contributes nearly 15% to GDP but provides employment to nearly 48 percent of Indian workforce. This indicates that agriculture is overcrowded perhaps this is the root cause of poverty, farmers’ distress and increasing farmers’ suicides. Some experts doubt the target of DFI and refer it as impossible and unrealistic. (Gulati 2016)

A holistic approach for the development of agriculture sector was therefore followed by introducing multiple reforms such as: improvement in crop productivity; improvement in livestock productivity; resource use efficiency or savings in the cost of production; increase in the cropping intensity; diversification towards high value crops; improvement in real prices received by farmers; and shift from farm to non-farm occupations". The paper makes an attempt to review the work done so far on these parameters so that if needed corrective action may be initiated in time.

Key Words:

Balance Growth; Unbalanced Growth; Backward and forward linkages;  productivity; input cost; investment; farmers’ welfare; Green Revolution; Soil health; cropping intensity; livestock productivity; diversification; non-farm occupation; micro irrigation, e-NAM; post- harvest infrastructure and value addition.

 

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*Vice Chancellor           

Shri Khushal Das University,  Pilibanga, Hanumangarh (Raj.)

International Conference on “ Innovative Research on Science, Humanities, Engineering & Management (IC-IRSHEM-2020) jointly organised by Shri Khushal Das University, Pilibanga, Hanumangarh and Research Foundation of India on 15-16 Feb 2020.

 

 

            INTRODUCTION:

Reduce the yield risk and price risks are two important milestones in the journey of Doubling the Farmers’ Income (DFI) in next few years. Many governments have launched a numerous schemes to reduce farmers’ distress and increase their welfare during more than past seven decades. These include diversification of crops, using new technologies, agricultural extension services to disseminate knowledge to farmers, increase in irrigation facilities, rural roads, and other public investment in agriculture. Yet during the last few years issue of farmers’ suicides have necessitated policy revisit and assess ourselves as where exactly do we stand and what is the way ahead. 

The present government has for the first time took a paradigm shift and focused on farmers’ income and their welfare through agricultural growth. For the first time we heard that the government wish to double farmers’ income by 2022 to mark 75^th year of India’s independence.

In pure economic theory we have heard of two distinct development approaches; Balanced Growth, and Unbalanced Growth. In balanced growth it is believed that the growth of various sectors and regions in underdeveloped countries needs large investments simultaneously the theory was pioneered by Ragnar Nurkse. In contrast to this Hirschman gave his thesis of unbalanced growth. The theory emphasises on investments in strategic sectors of the economy instead of all the sectors simultaneously.  According to this theory other sectors would develop automatically through sectoral linkages. Following this theory our planners thought that being in a very backward and poor stage agricultural could not become a leading sector due to its weak backward and forward linkages and followed the path of heavy industrialisation following Mahalanobis Model in the Second Five Year Plan.

Although it was always said that agriculture sector plays a pivotal role in the economy but there was a parallel view that increase in terms of trade in favour of agriculture would reduce profits for industry (Lewis, 1954).  Therefore never we made a serious effort to make Terms of Trade in favour of agriculture. Look at the statistics agriculture contributes nearly 15% to GDP but provides employment to nearly 48 percent of Indian workforce. This is the root cause of poverty and agrarian distress and large number of farmer’s suicides in some parts of the country.

The emphasis on agriculture after the third five year plan in the name of Green Revolution was a necessity rather than policy shift in favour of agriculture. But the success of Green Revolution helped India to achieve self sufficiency in food grains particularly in rice and wheat. But, soon it was recognised that we have to move beyond green revolution as it has neglected rain fed areas, nutrition crops like millets, non–cereals and resource poor farmers. It has also created ecological and environmental sustainability problems. Low farm income led to farmers’ agitations in many states of India.

A holistic approach for the development of agriculture sector was therefore necessary to follow. Accordingly, doubling farm income (DFI) requires initiating multiple reforms and programmes which includes the following aspects¹:

1)      Increase in productivity/ production and reduce losses

2)      Increase market access of agriculture produce through marketing reforms, post harvest infrastructure and value addition

3)      Reduce input costs of farmers through optimisation of resources used as inputs.

4)      Undertake governance and reforms.

5)      Expand risk mitigation measures to protect farmers against losses due to yield and price risks.

6)      Increase investment in and for agriculture

7)      Link development activities in sectors such as water resources, soil health, food processing, rural development, power, information technology, environment, fertilisers, and other sectors to agricultural development.

8)      Address background risks through initiatives such as Ayushman Bharat, Ujjawala, Poshan Abhiyan, Pradhan Mantri Matru Vandana Yojana, Sukanya Samriddhi Yojana, Beti Bachao Beto Padhao, Pradhan Mantri Awas Yojana, Swatch Bharat Mission and Mission Indradhanush.

           

Let us discuss some of these important pillars:

 

(1) INCREASE IN OUTPUT AND PRODUCTIVITY:

The agricultural output can be raised either by raising agricultural productivity or by bringing more land under cultivation. The possibility of second option is negligible therefore we will have to concentrate on increasing productivity. Agricultural productivity of crop sector increased at the rate of 3.1 per cent during 2000-01 to 2013-14.  If the same rate continues it will contribute about 16.7 per cent increase in total farm income in seven years i.e. 2015-16 to 2022-23. Live stock constitutes nearly 30 per cent of the total income from agricultural sector. This sector has shown growth rate of 4.5 per cent during 2000-01 to 2013-14. Thus, it will contribute 10.7 % in the seven years  (Chand, Ramesh 2017 p. 15)

With regard to increasing productivity and production what has been achieved during past few years. The total production of food grains which was 264 Million Tonnes (MT) in the year 2014-15 increased to 291 MT during 2018-19 showing an increase of about 10.2 percent.

Similarly, increase in total factor productivity and diversification towards high value crops offers a great scope in raising the income. The production of fruits and vegetables increased by about 18.86 per cent during the same period from 265 MT to 315 MT. Milk, production fish production, and other agricultural commodities have also shown upward trend so broadly speaking the strategy of realising higher output through productivity growth has been on the right track. 

(2) REDUCING COST OF PRODUCTION:

As for reducing cost of cultivation, the two important initiatives of the government are (i) the introduction of soil health card, and (ii) use of micro irrigation. The soil health card saves application of chemical fertilisers thus reduce cot of cultivation and raise productivity if farmers follow the advice of scientists, similarly use of micro irrigation techniques saves water. The newly introduced neem coated urea reduces the amount of urea in the crops. Thus work is under progress on this important pillar also.

(3) MARKETING:

Creation of National Agriculture Market Scheme (e-NAM) and integration of mandies  with e-NAM, Development and up gradation of  22000 rural markets haats,  is important in providing best possible price to  farmers. Already 585 markets are on board. A Committee of Chief Ministers of states to transform agricultural credit has also been set up. The amount of agriculture credit which was 8.2 lakh crore in the year 2014-15 has gone up to 11.5 lakh crore in the year 2018-19. The government has adopted the recommendations of the Swaminathan Commission (Principle of 50% margin of profit for all crops) for determination of MSP for addressing yield risks and providing reasonable return to farmers. No doubt there are economic arguments against the very concept of MSP there are issues of imperfect markets and risk of survival faced by poor farmers. In medium terms till workable alternatives are put in place, it is reasonably good for farmers.

Government has also tried to address the issue of price risks through creation of buffer stock of pulses, passing of Contract Farming Act, Agricultural Land Leasing Act, and covering nearly 50% of the population under Pradhan Mantri Fasal Bima Yojana (PMFBY) by 2019-20.  In addition Direct Transfer of Rs. 6000/- per year to farmers is another incentive which guarantees some monies going in the pocket of farmers. PM Maan Dhan Pension Scheme has also been introduced⁴.

The emphasis is on addressing the problems of risks adversely affecting farmers’ income and to work on more comprehensive, integrated and holistic approach towards fulfilling the target of doubling the farmers’ income within the time frame. The efforts are certainly based on good knowledge, extensive research and use of technology yet the desired outcomes could not be achieved.

(4) INCREASE INVESTMENT IN AND FOR AGRICULTURE:

As per a report of the Committee on Doubling Farmers’ Income (DFI) said an additional investment of Rs 6,39,900 crore is required from both public and private sectors to enable doubling of farmers' real income by 2022-23, on  2004-2005 prices⁵.

To boost farmers’ real income the committee said an additional Rs. 617 billion private investment is required. The committee strongly recommended the stepping up of institutional credit on a large scale as only 50 to 60 percent of the requirement is being fulfilled through institutional credit. In back States the investment requirement will be still more.

During last few years we have witnessed higher budgetary allocations e.g. the total budgetary allocation of the Ministry of Agriculture and Farmers which was Rs. 25460 crore in the year 2015-16 gone up to Rs. 58080 crore in the year 2018-19. But still it is not sufficient in relation to the projections made by the Committee on DFI.

The public investment for agriculture also needs to be stepped up but looking at the fiscal situation and shrinking collection of GST we may only hope that these dreams will be fulfilled in coming next few years.

(5) LINKING VARIOUS ACTIVITIES:

Inter-Ministerial Committee to examine issues relating to Doubling of Farmers’ Income (DFI) has identified the below mentioned seven sources of income to double farmers' income by 2022.  A holistic approach for linking of development activities in sectors such as water resources, soil health, food processing, rural development, power, information technology, environment, fertilisers, and other sectors to agricultural development is needed to achieve the goal of DFI but we do not witness any such sign except a few scattered efforts here and there.

(6)  POST HARVEST INFRASTRUCTURE AND VALUE ADDITION:

Report of the Committee on DFI expands the post-production value capture activities by going beyond ‘marketing’ and advocating ‘monetisation’.³ On the lines of the well-known ‘marketing efficiency’, the Committee adopts ‘monetisation efficiency’ as the right measure of value capture. Agricultural production is not the sole output from the rural economy. Agriculture in turn, sets off other near-farm and non-farm economic activities in the rural landscape. Agro-food processing industries have the potential to generate significant employment in production activities and also indirect employment through its forward and backward linkages. These industries would help in reducing post harvest losses and wastes as well as in using by-products more efficiently. This in turn will increase rural income.

The overall well-being of the rural population therefore depends on agriculture as a primary sector, and various associated secondary and tertiary sector activities that either support agriculture or are supported by agriculture.

As part of the DFI strategy, the farming household should be empowered, not only to capture the maximum value from all that is produced off the farms, but also from other near-farm economic activities. The secondary sources of income help mitigate some of the risks associated with agriculture and allows for shared income sources in a household.

(7) EXTENSION AND KNOWLEDGE DIFFUSION:

Past strategy for development of agricultural sector in India has primarily focused only on raising agricultural output and raising farm productivity.  The strategy proved successful as it led to Green Revolution and not only made India a self sufficient at aggregate level but also a net food exporter country. The new strategy focuses on farmer’s welfare by using various measures to achieve the targeted income including agricultural extension services.

Agricultural extension has been understood as an important techno-social enabler that supports farmers in their endeavours to produce more. If extension is to serve the purpose of effecting a paradigm shift in agriculture from production-centricity to income centricity it deserves to be redefined⁶.

Accordingly, the DFI Committee redefines Agricultural Extension as follows:

“A system of empowering farmers with information, knowledge, technology, skills, risk and farm management practices, across agricultural sub-sectors and along all aspects of the agricultural supply chain, so as to enable the farmers to realise higher net income from their enterprise on a sustainable basis”

 The new definition covers not only the cropping systems, but also other sub-systems including horticulture, animal husbandry, fisheries, etc. emphasising thereby the importance of diversification, demand centric innovations and farming system approach.

Doubling real income of farmers till 2022-23 over the base year of 2015-16 requires annual growth of 10.41 per cent in farmers’ income (Chand, Ramesh 2017). This calls for a multipronged action of all above strategies and plans in a time bound action plan.  The above set of activities initiated by the government, symbolise the diligence and commitment to double the farmers income in a time bound manner. A major impediment to the success of these strategies is small farm sizes. A unique ‘Small Farmers, Large Field’ (SFLF) model has been first successfully experimented in Vietnam. In this model farmers physically pool their land and set up companies that operate like private businesses.  This experiment has been successfully tested in Odisha informally which shows the way forward for achieving economies of scale and reducing cost of cultivation inturn, resulting in rise in income of farmers. NITI Aayog member Ramesh Chand, in a 2017 policy paper, advocated collective action for minimising the scale disadvantages faced by small and marginal farmers. The Farmer Producer Organisation/ Company approach is one way to enable them to improve their bargaining power, by pooling resources and linking them to the market.

 

The strategies proposed for doubling farmers’ income include planting better seed varieties/hybrids, improved production practices, diversification towards high-value crops, development of infrastructure and market linkages, and providing access to institutional credit. Thus, government initiatives and intensions are clear and are visible in the schemes launched and multipronged efforts made during past few years but sustained and incremental efforts will be needed to achieve the goal.

 

REFERENCES

1.      Gulati Ashok and Sweta Saini (2016), From Plate to Plough, raising Farmers’ Income by 2022, March 28.

2.      Mishra, Promod K. (2019) Driving Indian Agriculture towards Farmers’ Welfare: Current Policy Perspectives, Inaugural address delivered at the 78^th Annual Conference of ther ISAE, at Institute of Economic Growth New Delhi, Ind. Jn. of Agri. Econ. Vol 74, No. 1 , Jan-March2019

3.      Economic Survey, GOI , 2019

4.      Doubling Farmers’ Income – Volume XIV Comprehensive Policy Recommendations, Department of Agriculture, Cooperation and Farmers’ Welfare, Ministry of Agriculture & Farmers’ Welfare. Sept. 2018.

5.      PM Kisan Maan Dhan Yojana, http://vikaspedia.in/agriculture/agri-insurance/pm-kisan-maan-dhan-yojana

6.      Economic Times, The committee on Doubling Farmers’ Income, 14^th  August 2017

7.      Doubling Farmers’ Income – Volume XIV , p. 155

8.       Chand, Ramesh (2017) Doubling Farmers’ Income: Rational, Strategy, Prospects and Action Plan, Niti  Aayog, GOI, New Delhi.

9.      Samarendu Mohanty & Sampriti Baruah,2018 Agricultural economics: How doubling of farmers’ income is possible even with small landholdings, Indian Express, 1 Nov.

 

Characteristics of a Developed Economy

•The main characteristics of developed countries are as follows.

1.Significance of Industrial Sector.

2.High Rate of Capital Formation.

3.Use of High Production Techniques and Skills.

4.Low Growth of Population.

5.High Income levels

6.Better standard of living and quality of life

Distinction Between Developed and Underdeveloped 

Economies

•On the basis of per capita income.

•Capital Formation

•High rate of growth of population 

•Poverty and unemployment, Underemployment

•Low output and Low Standard of Living

• predominance of Agriculture

•Low productivity

Technology 

Economic Development and Economic Growth

Normally in  textbooks, growth and development are used synonymously, and this usage is widely acceptable. However, in particular, the two terms have been distinguished by different economists as follows;

Concept of Economic Development

 •In economic terms, development has been understood as achieving sustainable rates of growth of income per-capita to enable the nation to expand its output faster than the population (Todaro and Smith 2011). 

According to Prof. Meier and Baldwin:

" Economic Development is a process whereby an economy's real National Income increases over a long period of time"

vLike Todaro Prof. Denis Goulet emphasises on these three Core Values of Development in his book “The Cruel Choice” published in 1971:

Life Sustenance:

The life-sustaining basic human needs include food, shelter, health and protection. When any one of these is absent or in critically short supply, a condition of absolute "underdevelopment" exists.

Self-esteem:

A second universal component of good life is self- esteem- a sense of worth and self-respect- of not being used as a tool by others for their own ends. Due to the significance attached to material values in developed nations, worthiness and esteem are now-a-days increasingly conferred only in countries that possess economic wealth and technological power- those that have developed.

Freedom

Arthur Lewis stressed the relationship between economic growth and freedom from servitude when he concluded that "the advantage of economic growth is not that wealth increases happiness, but that it increases the range of human choices.

Goulet, D. (1971) The Cruel Choice: A New Concept in the Theory of Development, New York, Athenaeum

1. To some economists, economic development refers to the process of expansion of backward economies, while economic growth relates to that of YoY measure.

2. Schumpeter, however, uses the term "economic development" as a spontaneous and discontinuous change in the stationary state which disturbs the equilibrium state previously existing. And the term "economic growth" is used to denote a steady and gradual change in the long run which comes through a general increase in the rate of saving and population in a dynamic economy.

 3. Prof. Kindleberger has given the differences between growth and development as; "Growth may well imply not only more output and also more inputs and more efficiency, i.e., an increase in output per unit of input. Development goes beyond these to imply changes in the structure of outputs and in the allocation of inputs by sectors. By analogy with human beings to stress growth involves focusing on height and weight, while to emphasize development, draws attention to the change in functional capacity in physical coordination.

4. To some, economic development is the outcome of conscious and deliberate efforts involved in planning. Economic growth, on the other hand, signifies the progress of an economy under the stimulus of certain favourable circumstances, e.g., the progress achieved by the United Kingdom during the Industrial Revolution.

5. In his simple words, A. Maddison says, "The raising of income levels is generally called economic growth in rich countries and in poor ones it is called economic development". Mrs. Hicks has also expressed almost the same views and said that economic development refers to the problems of underdeveloped countries and economic growth to those of advanced countries she points out that the problems of underdeveloped countries are concerned with development of unused resources, even though their uses are well-known; while those of advanced countries are related to growth, most of their resources being already known and developed to a considerable extent.

6. According to Prof. Mehta, however, the term "growth" has quantitative significance. Growth suggests an increase in the quantity or volume of something. An increase in a country's population, national income; per capita income, consumption, saving, investment, foreign trade etc. over a period, all imply growth. In economics, however, growth strictly means an increase in real income, gross and per capita. On the other hand, development is a process of expansion, fulfilling the desire to have an increase in national income. From the above will be clear, the distinction and interface of growth and development.

Distinguish Between Developed and Underdeveloped Economy

Although their is no clearcut demarkation line between the two yet economists generally the following differenes between the two:

1. Per Capita Incom:
Underdeveloped economies are distinguished from developed economies on the basis of per capita income. In general, those countries which have real per capita incomes less than a quarter of the per capita income of the United States, or roughly less than 5000 dollars per year, are categorised as under-developed countries.
2. Lack of Capital
An underdeveloped economy, compared with an advanced economy, is underequipped with capital in relation to its  population and natural resources. The rate of growth of employment and investment in such an economy lags behind the rate of growth of population. The resources are not only employed but also underemployed. In technical jargon, the production possibility frontier of a poor country is far ahead of the actual production curve, whereas the gap between the potentiality and actual utilisation of resources is narrow in a developed economy.

3.High rate of Growth of Population

High rate of growth of population is an important characteristic of most of the underdeveloped economies. Population growth in underdeveloped countries neutralises economic growth. In advanced economies, the case is different. As Prof. Hansen points out, one of the empirical tests of secular stagnation in advanced economies is the declining rate of population growth. The stagnation problem in a developed economy is a problem of population, natural resources and technology failing to keep pace with capital accumulation.

4. Poverty

The central problem of underdeveloped economies is the prevalence of mass poverty which is the cause as well as the consequence of their low level of development. Shortage and scarcity are the main economic problems in these economies, whereas the affluent societies of advanced countries have economic problems resulting from abundance.

5. Low income Vicious Circle

 In an underdeveloped economy, the fundamental problem is that of output, real income or the standard of living, as these economies are characterised by low productivity, low income and a poor standard of living. A vast majority of people in an underdeveloped country are ill-clothed,
undernourished and without adequate shelter. To use Rostow's terminology, economies of poor countries similar to those of a traditional society, where modern science and technology are either not available or not regularly and systematically applied. On the other hand, most of the developed countries at present enjoy a high rate of mass-consumption. In their economies, per capita real income has risen to a level at which a large number of people can afford consumption transcending food, shelter and clothing.

6. Capital Deficiency

Capital deficiency is the main cause of poverty of a poor country, while affluent capital accumulation is the main cause of stagnation of an advanced country.

7. Under employment

In an underdeveloped economy, the problem of under-employment is more important than that of unemployment, whereas a developed economy may have a cyclical unemployment problem. There is chronic unemployment in an underdeveloped economy. An advanced economy may have unemployment occasionally due to business fluctuations and a low marginal propensity to consume. Whereas an under developed economy is confronted with the problem of disguised unemployment in the sense that even with unchanged techniques in agriculture could be removed without reducing agricultural output. Thus, in a developed economy, unemployment means waste of resources, while in an underdeveloped economy, it is of disguised type.

8. OldTechnology

Poor countries are poor in technology, advanced countries are advanced in technology. In fact, the level of technology attained in production is a reliable indication of the level of economic development. Employment of advanced technology goes along with large capital resources, high attainments in the fields of scientific research, greater availability of entrepreneurial skill and a good supply of efficient skilled labour.

Thus, development of technology is the basic objective of the backward economy whereas development of technology no longer remains the overriding objective of an affluent society.

ANOVA

We will discuss about testing of hypothesis where a specific  hypothesis is stated about a population or universe parameter, and sample statistics are used to assess the likelihood that the hypothesis is true. The hypothesis is based on available information and the investigator's belief about the population parameters.

The specific test considered here is called ANOVA or Analysis of Variance. It is a test of hypothesis or a statement of researcher that is appropriate to compare means of a continuous variable in two or more independent comparison groups. It may be comparision of two comparision groups one being given a new drug for treatment of malaria medicated group a to a placebo and to a standard treatment. A study may compare mean blood pressure or a mean cholosteral level in persons of different weight groups. Under weight, normal weight and over weight.

ANOVA technique may be applied when there are two or more than two comparision groups. 

The test statistic must take into account the sample sizes, sample means and sample standard deviations in each of the comparison groups.

The fundamental strategy of ANOVA is to systematically examine variability within groups being compared and also examine variability among the groups being compared.

The ANOVA approach

Suppose we wish to compare the mean systolic blood pressure according to the Body Mass Index (BMI) we devide these groups in to four  categories (Under weight Normal, Over weight and Obese) let us denote these groups by A, B, C and D.

we wish to test whether there is a statistically significant difference in mean systolic blood pressures among the four groups.

The sample data are organized as follows:

           Group 1 Group 2              Group 3             Group 4

Sample Size n1             n2                   n3                           n4

Sample Mean  X1 X2                   X3                            X4

Sample Standard 

Deviation           s1                 s2                  s3                            s4

The hypotheses of interest in an ANOVA are as follows:

• H₀: μ₁ = μ₂ = μ₃ ... = μ_k
• H₁: Means are not all equal.

where k = the number of independent comparison groups.

In this example, the hypotheses are:

• H₀: μ₁ = μ₂ = μ₃ = μ₄
• H₁: The means are not all equal.
• The null hypothesis in ANOVA is always that there is no difference in means. The research or alternative hypothesis is always that the means are not all equal and is usually written in words rather than in mathematical symbols. The research hypothesis captures any difference in means and includes, for example, the situation where all four means are unequal, where one is different from the other three, where two are different, and so on. The alternative hypotheses, as shown above, capture all possible situations other than equality of all means specified in the null hypothesis.
  Test Statistic for ANOVA
  The test statistic for testing H₀: μ₁ = μ₂ = ... =   μ_k is:
  and the critical value is found in a table of probability values for the F distribution with (degrees of freedom) df₁ = k-1, df₂=N-k.
  In the test statistic, n_j = the sample size in the j^th group (e.g., j =1, 2, 3, and 4 when there are 4 comparison groups),   is the sample mean in the j^th group, and   is the overall mean.  
  
  
  k represents the number of independent groups (in this example, k=4), and
  N represents the total number of observations in the analysis.
  
  
  Note that N does not refer to a population size, but instead to the total sample size in the analysis (the sum of the sample sizes in the comparison groups, e.g., N=n₁+n₂+n₃+n₄).
  
  
  The test statistic is complicated because it incorporates all of the sample data. While it is not easy to see the extension, the F statistic shown above is a generalization of the test statistic used for testing the equality of exactly two means.  
• Note:
• The test statistic F assumes equal variability in the k populations (i.e., the population variances are equal, or s₁² = s₂² = ... = s_k² ). This means that the outcome is equally variable in each of the comparison populations.
• The F statistic is computed by taking the ratio of what is called the "between treatment" variability to the "residual or error" variability.
• In analysis of variance we are testing for a difference in means (H₀: means are all equal versus H₁: means are not all equal) by evaluating variability in the data.
• The numerator captures between treatment variability (i.e., differences among the sample means) and the denominator contains an estimate of the variability in the outcome.
• The test statistic is a measure that allows us to assess whether the differences among the sample means (numerator) are more than would be expected by chance if the null hypothesis is true. 
• The decision rule for the F test in ANOVA is set up in a similar way to decision rules we established for t tests. The decision rule again depends on the level of significance and the degrees of freedom.

 The F statistic has two degrees of freedom. These are denoted df₁ and df₂, and called the numerator and denominator degrees of freedom, respectively. The degrees of freedom are defined as follows:

df₁ = k-1 and df₂=N-k,

where k is the number of comparison groups and N is the total number of observations in the analysis.  

If the null hypothesis is true, the between treatment variation (numerator) will not exceed the residual or error variation (denominator) and the F statistic will small.

The rejection region for the F test is always in the upper (right-hand) tail of the distribution as shown below.

Rejection Region for F   Test with a =0.05, df₁=3 and df₂=36 (k=4, N=40)

The decision rule is: Reject H₀ if F > 2.87.

For solved example see my another post.

POST ELECTION MONETARY POLICY

Rate Cut will Boost Growth?
Some economists while comparing Indian interest rate with the rates in USA or Japan often argue that the cost of borrowing in India is high and that it must be brought down. They argue that it will boost investments and growth. MPC has also endorsed it while recommending rate cut.

Contrary to general belief about disagreement among economists the first post election review by the MPC unanimously decided to reduce the policy REPO rate by 25 basis where as looking at slowdown in the growth and liquidity crises market was expecting more, the sensex after trading higher in the morning session declined more than 300 points in the afternoon.

The reason for expecting a higher rate cut was the statement made by Mr. Shakti kant Das in a forun at Washington where he categorically remarked that there was no need to think that the policy rate cut will be the same every time by 25 basis point it can be either more.

Rate cut will not boost the growth till the market centimatesare negative.

Remember the Keynesian concept of Liquidity Trap. So government will have to continue to do the measures to do increased spendings on rulal economy so the industry centiments turns positive and private investers do come forward to invest their capital. Investment will come
a. if their is enough demand and
b. the invester see profitabilitity gain
So the wait and watch policy before the first budget of Ms. Nirmala Sitharaman, the first full fledged woman Finance Minister of India is timely.
Trickle down of benefits is not seen:
What is not working at ground level is the passing the benefits of rate cut to the borrowers, In the market the interest rates are stickey and liquidity is tighter. So RBI should ensure that the benefits of the rate cut percolates to the ground so common man may get cheaper loan and participate in the growth. thetargted growth rate for FY 20 has also been reduced to 7% whereas it was 7.2% earlier. Further in the wake of the Q 4 Growth rate coming down to below 6 % the target for FY 20 has been fixed by the MPC at 6.4 to 6.7 % in the first half anf7.2% to 7.5% in the second half of the next financial year.

Inflation is stable stimulating sentiments for bigger cut:

The expectations of the market in the light of stable CPI and the fixing of target inflation at 4 % plus minus 2 % were that the MPC announces a bigger cut this was the first time when the rate cut was announced third time in a row after 2013.

The CPI targets have been revised to 2.9% to 3%. If the government succeeds in this than it is the time to take up the Reform Agenda on the top in this budget which has been kept on halt may be again taken up

If this is not taken up immediately in this budget people may loose faith and the coming election in State Assemblies may not be as rewarding for the present government as they have been now at the centre again in Modi Government 2.0

So without waiting further the government should go ahead on its Economic Reform agenda and boost the slowing economy with a further dose of rate cut in next sixth months by at least 50 basis points.

*****