A Famine Of Ideas For Farmers

It is quite macabre, really — the barely concealed glee that seems to course through liberal analysts and intellectuals whenever it looks like Prime Minister Narendra Modi is heading for trouble. Macabre, because as the latest series of protests and events centred around farmers show, it is as ghoulish as dancing on corpses. Soon after violence erupted in Madhya Pradesh, pundits pontificated on how the Modi regime, fed on an overdose of hubris, was neglecting the farm sector. But was it?

One of the key promises in the recent Budget presented by finance minister Arun Jaitley has been a massive focus on agriculture — with a solemn pledge to double farm income in five years. But Maharashtra farm leader Raju Shetti, who had smashed some bastions of Sharad Pawar and who has been quoted in a related article in this issue, had dismissed the promise as hype without any substance. His alliance with the Bharatiya Janata Party (BJP) in Maharashtra is now at a breaking point, despite the announcement of farm loan waivers. In many ways, he is right in saying that all the focus on the farmer is more hype than substance. Well-known farm analyst Devender Sharma is even more evocative when he says that India has displayed a strange knack of mollycoddling the corporate sector with socialism, while asking farmers to face the uncertain onslaughts of capitalism.

Quite simply, no matter what the intentions of the Modi regime are, the crisis confronting Indian agriculture is not going to be solved in five years. The causes are deep rooted and will take much longer to tackle, even if the government is honest in its efforts. But before we analyse the reasons behind the misery faced by farmers, let’s clear some myths. Many so-called pundits seem to think that Indian agriculture revolves around production of foodgrain. It doesn’t. Foodgrain output last year was about 260 million tonne. The Indian farm sector also produced about 40 million tonne of cotton, about 350 million tonne of sugarcane and close to 300 million tonne via horticulture. We are not factoring in milk, poultry, fisheries, spices, tea, coffee and myriad other farm and forest products. In effect, agricultural output is not less than 300 million tonne a year, but more than a trillion tonne a year. That gives an idea of the potential the farm sector has, if the right kind of policies are followed.

That also brings us to the reasons why the Indian farmer seems to lurch from crisis to crisis. The first is sheer common sense economics. Die-hard fans of Modi say that India is unique in many ways, which should make us all proud. Perhaps so. But India is also unique in many ways that should make us at least a little embarrassed, if not ashamed. One of the unique features of India is the sheer number of people dependent on the farm sector for a livelihood. When India began its tryst with destiny, agriculture accounted for more than 40 per cent of the gross domestic product (GDP) and offered almost 70 per cent of the population a source of livelihood. Decades down the road, the share of agriculture in the GDP has fallen well below 20 per cent, but about 50 per cent of the population continues to depend on the farm sector to make a living. This single piece of data explains the crisis in rural India.

To make matters worse for the farmer and the landless labourer, the Indian economy has failed to offer other livelihood opportunities to those who want to leave agriculture. This is another unique feature of India. Every major economy of the world has moved from a dominant farm sector to a dominant manufacturing sector to eventually a dominant services sector. In India, the share of manufacturing in the GDP has never managed to cross 25 per cent. Therein lies the problem. More than 80 per cent of farmers have land holdings of much less than five hectares, not enough to guarantee even a lower-middle-class standard of living for a family of four or five. But most are stuck because there are no manufacturing jobs. Those who do migrate to urban centres, work as casual wage labourers and live in poor conditions in slums.

The malignant impact of this economic trajectory has been compounded by atrocious government policies. The haunting spectre of famines created a mindset in India that treated foodgrain as a precious commodity. The focus was on the consumer, rather than the farmer. So independent India continued British era laws that basically make it a criminal offence for a farmer to take his produce to another state for selling. Laws stipulate that he must sell his produce in the local mandi where he is at the mercy of merchants (who have often lent him money) and corrupt procurement officials who are in cahoots with the merchants.

This is the reason why the farmer gets a pittance for his produce even during shortages when prices in urban markets are going through the roof. Also, only a handful of foodgrain items are guaranteed a minimum support price (MSP). For the rest, the farmer is expected to become a capitalist and depend on market forces. It is this disgraceful apathy displayed over a long term that renders even farm loan waivers largely ineffective for a majority of farmers. Despite grand pronouncements, most small farmers lack access to institutional credit and depend on village money lenders, who never waive any loan. To top it all, the Indian farmer simply doesn’t have access to global markets. The government of the day promptly bans exports when urban consumers start complaining of higher prices.

The third critical reason behind the crisis in the farm sector, is lack of infrastructure. Till the dawn of the 21st century, roadways in most of rural India were virtually non-existent. It was a challenge for the farmer to transport his produce even to a nearby town mandi. Thanks to an initiative launched by former Prime Minister Atal Bihari Vajpayee and continued by others, there has been a dramatic improvement in rural roads. But vast swathes of rural India remain poorly connected with urban markets.

In most other economies that claim to be modern as well as farmer-friendly, a crucial infrastructure component in rural areas is adequate facilities for storage. That is virtually non-existent in India. It has been estimated that about 30 per cent of horticultural output goes waste in India, for lack of cold storages. That would be at least 60 million tonne a year. And yet, cold storages remain elusive. Way back in 1992, the government had announced an ambitious policy to encourage large-scale private sector investments in cold storages in India. They were supposed to help the Indian farmer move up the value chain. Twenty five years down the road, the government continues to announce more incentives.

Is there a way out of this mess? There is. But there are no quick fixes and no short cuts. Quite simply, the farm sector in India needs a massive dose of investment in infrastructure, along with a radical change in policy thinking that currently places the interest of urban consumers over farmers. But most importantly, about 400 million Indians need to move away from the farm to other sources of livelihood. As of today, that looks like an insurmountable challenge.

Source: BW Businessworld