Capitalism for kisan……..Saubhik Chakrabarti
Why agriculture is a victim of urban selfishness and political correctness
Do the math. 200 million-plus people are engaged in a high-risk economic activity where the average size of the business is tiny, where output per head (what economists call productivity) is stagnant or decreasing, where marketing opportunities are limited and where god and government largely determine income outcomes. This is a recipe for keeping 200 million-plus people in a state of permanent, acute vulnerability. Especially the 100 million-odd who are not just workers but have some capital. In the first decade of the 21st century, in a democracy thats called a major economy, is this normal? Tolerable? Socially, economically and politically acceptable? Put like this, the answers are no in every case. Put in the context of Indias political economy, and recognising that we are talking about Indian agriculture, the answer seems to be yes.
As the Indian Meteorological Department (IMD) and the government abandon their month and a half long fantasy that monsoon will be normal, as drought management meetings begin in earnest, the question public policy should but wont ask is, why is the status quo in farming so sanctified? Yes, there are micro issues that are important right now. IMDs long period-large area weather prediction model needs competition. Drought relief needs to be targeted to the dozen and a half agro-climatic regions that seem to be the most hit by poor rains. Fine-tuning NREGA, so that it acts as an income stabiliser in a drought, is crucial. Whether the soil moisture content for the winter crop has been critically affected by deficient southwest monsoons needs to estimated.
From another perspective, there are issues about food prices and GDP growth. Clever stock management (buffer stocks of cereals are high) and smart imports will dampen some but not all of the rise in food prices. Food price inflation is not impressed by a tight monetary policy but, given the ruling consensus on such things, if food price inflation persists, the monetary policy hammer may come down. Rain-fed, as opposed to irrigated, agriculture affects about 6 per cent of GDP currently. So a poor monsoons direct growth effect is not large. Goldman Sachs says bad rains may shave 0.3 percentage points off 2009-10s GDP growth. The finance minister has said GDP growth will be 6 per cent, down by about 0.5 percentage points from the earlier rough consensus. But if interest rates stay high for the rest of this fiscal year, the impact in terms of potential output lost can be considerable; private investment demand, which hasnt recovered, wont get the boost and government consumption demand, which shored up growth in 2008-09, cant do it again because deficits are too high.
Discussions on agriculture usually stop here: small picture policies for farming and small discussions on agriculture in the context of the big growth picture. What will it take for public policy to consider the big picture for 200 million-plus Indians in an acutely vulnerable profession? A crisis? But agriculture is in crisis. When incomes dont rise because of productivity increases but because government is an over-generous buyer of your output (the misleadingly named minimum support prices), when the business will crash without huge input subsidies (power and fertiliser), when 60 per cent of the business (rain-fed agriculture) that depends on god for one input contributes only 30 per cent of this businesss contribution to GDP, how is this business not in a crisis?
Maybe, we need a really big, simple, easy-to-understand crisis that makes farming the hot topic of evening news. However, the only kind of crisis that qualifies under these parameters will be defined by food shortage/ high food prices that affect us. That wont help agriculture. We will then look at farming in terms of production and we will then argue that taking away land from farming will harm production. We wont look at farming in terms of farmers productivity-linked, marketing-linked income. This is a view, a dominant one that combines selfishness (cauliflowers cant be that costly in South Delhi) and political correctness (dont take land away from farmers). And it completely as well as self-righteously misses the point.
Several points, in fact. First, all agriculture needs is a productivity jump that matches that seen in green revolution. If that happens, Indian farming can feed two billion people. Second, that productivity jump will not come, no matter how much crop research is done, without the old-fashioned formula of efficient employment of large amounts of capital in large-size businesses. Third, the market for farm products is huge domestically. So, big capital will come if the system allows consolidation of land holdings. Will farmers sell land? Ask a small farmer whose business is in permanent crisis. Will farm labour be happy? Ask a farm daily wager whose employment prospects have just dried up because of bad rains. If farming is industrial in technique and scope, several other changes, like the disappearance of middlemen who take away 15-25 per cent of farmers income, the elimination of wastage that eats up 20-30 per cent of output, will follow. Fourth, if industrial farming in super large landholdings is allowed, the other problem acquiring land for industry, and jobs for ex-agriculturalists gets addressed. This, because (a) we would have created a land market, (b) high productivity would mean much more production and that will convince even those obsessively worried about amount of arable land available, and (c) new factories will create the new jobs.
At this point, the pure politically correct argument comes up: doing all this, we make Indian food production critically dependant on big capital, including big foreign capital. Actually, the time Indias food availability was critically dependent on big foreign capital was in early-middle 60s: wheat imports from America; Indias chief planner, Ashok Mehta, meeting Lyndon Johnson to clear the Fourth Plan; America asking for a currency devaluation, Indira Gandhi agreeing; then a failed monsoon; not enough farm output for exports; big problems and Mrs G giving us Indian socialism.
Now, big capital can only do for agriculture what it does for industry, help it. If you see what potato procurement by an MNC in parts of Punjab or soybean procurement by a big Indian firm in parts of MP has done to improve farm incomes, you get an idea of what agriculture is missing out on.
We need to say this loud and clear, like we said it and still say for industry. We need to stop being selfish when talking about agriculture. And stop being politically correct.