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Agricultural liberalization need of the hour

1 November 2010 - 7:25pm — murali772
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Economy

The following are the excerpts (for a quick reading) from an excellent essay by Dr Jayaprakash Narayan, on the subject. The full essay can be accessed from the attached document.

The Government of India could make a net profit of not less than Rs 50,000 crore this year by exporting just one variety of rice grown in Andhra Pradesh and Karnataka, said Lok Satta Party President Dr Jayaprakash Narayan here today.

Addressing a media conference, Dr JP hoped that the economist-turned Prime Minister would seize the historic opportunity not merely to earn precious foreign exchange for the country but also to mitigate widespread distress among farmers. It was time Dr Manmohan Singh, who liberated industry from the license-permit raj, focused on rescuing agriculture from imminent collapse.

The Governments - Union and State - have put farmers in fetters with their antediluvian farm sector policies. A corrupt, thoughtless license-permit-quota raj has been crippling the farm sector. In agriculture, production itself is dependent on weather gods, pests and diseases, availability of quality inputs and timely workforce. One out of three crops is lost and the farmer suffers heavy losses. But thanks to Government policies, even when a farmer raises a good crop overcoming all obstacles, the price is depressed. The farmer loses all when the crops fail; and he loses heavily when there is a good harvest.

Dr JP accused both the Union and State Governments of ruining agriculture, the mainstay of 60 percent of people in the country. The per capita income of farmers and tenants who are solely dependent on agriculture in India is Rs15,000 a year, in contrast to Rs.1,04,000 of those engaged in non-agricultural occupations. How can industry flourish if 60 percent of people lead a subsistence existence and cannot afford goods produced by industry?

No major country actively works against its own farmers as the Indian Government does. If there is a conspiracy to destroy our agriculture, impoverish our farmers and tenants, and ruin village economy, the Government could not have done differently. Irrational and anti-national policies in agriculture are denying us market access, profits, foreign exchange and farm income. This shameless exploitation of farmers and tenants is leading to economic ruin of villages which constitute 70% of the population. This is also affecting the rest of the economy, as the demand for industrial goods and services is limited largely to 30% of the population. "The policies of the government are clearly resulting in India's economic growth being held back; eventually the economy will stagnate, and the nation will pay a heavy price," Dr JP said.

The essay says it all, and it is not quite rocket science. So, what is holding back the Agriculture minister from acting? Or, is it that he's too caught up with the BCCI and ICC shennanigans to bother with the travails of this vital sector of the country's economy?

Muralidhar Rao

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silkboard's picture

So what measures to understand and bat for?

silkboard - 3 Nov 2010 - 9:26pm
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Do want to read up and understand the props and measures to bat and push for on this subject. Haven't read the subject much, but is of interest. Unfortunately enough, event the likes of Business-Standard don't carry much substance on the subject.

Feel like we don't know the 60% of our economy well enough.

kbsyed61's picture

But Dr JP Prescribes govt to do exports!

kbsyed61 - 10 Nov 2010 - 6:00pm
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Murali Sir,

Thanks for the nice essay on Indian agriculture scene. While going through the essay I found an interesting articulation from DR JP.

"...Dr. JP said that a sagacious Government would promote free trade and exports to overcome problems of overflowing warehouses within the country and take advantage of the galloping prices in international markets. Instead of granting permits and licenses to private parties for rice exports, and attracting charges of favoritism, nepotism, and sleaze, the Government could canalize exports through State undertakings..."

Where is the liberalization here?

Fcat of the matter is, many factors have pushed agriculture to the corner and believe me it will be the make or break of economic resilence of the country.

This is one subject which is closer to my heart also.I am just collecting some facts, data on agriculture and will revert to share few thoughts on this important subject.

Syed

kbsyed61's picture

Many things are holding the Indian agriculture!

kbsyed61 - 10 Nov 2010 - 10:44pm
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SB,

"..Do want to read up and understand the props and measures to bat and push for on this subject..."

As things stand, many factors have held the agriculture in India back. As noted in the Dr JPs essay, multiple problems are afflicting the Indian agriculture.

Here are some excerpts from a RBI report on agri growth in India since 1949.

For more read here http://rbidocs.rbi.org.in/rdocs/content/pdfs/85240.pdf

If one furthers probes into problems agriculture in India, we come across many articles, one interesting among them is from Wikipedia quoting World Bank.

http://en.wikipedia.org/wiki/Agriculture_in_India

"...

Slow agricultural growth is a concern for policymakers as some two-thirds of India’s people depend on rural employment for a living. Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. Farmers' access to markets is hampered by poor roads, rudimentary market infrastructure, and excessive regulation.
—World Bank: "India Country Overview 2008"[10]

The low productivity in India is a result of the following factors:

  • According to World Bank, Indian Branch: Priorities for Agriculture and Rural Development", India's large agricultural subsidies are hampering productivity-enhancing investment. Overregulation of agriculture has increased costs, price risks and uncertainty. Government intervenes in labour, land, and credit markets. India has inadequate infrastructure and services.[11] World Bank also says that the allocation of water is inefficient, unsustainable and inequitable. The irrigation infrastructure is deteriorating.[11] The overuse of water is currently being covered by over pumping aquifers, but as these are falling by foot of groundwater each year, this is a limited resource.[12]
  • Illiteracy, general socio-economic backwardness, slow progress in implementing land reforms and inadequate or inefficient finance and marketing services for farm produce.
  • Inconsistent government policy. Agricultural subsidies and taxes often changed without notice for short term political ends.
  • The average size of land holdings is very small (less than 20,000 m²) and is subject to fragmentation due to land ceiling acts, and in some cases, family disputes. Such small holdings are often over-manned, resulting in disguised unemployment and low productivity of labour.
  • Adoption of modern agricultural practices and use of technology is inadequate, hampered by ignorance of such practices, high costs and impracticality in the case of small land holdings.
  • Irrigation facilities are inadequate, as revealed by the fact that only 52.6% of the land was irrigated in 2003–04,[13] which result in farmers still being dependent on rainfall, specifically the Monsoon season. A good monsoon results in a robust growth for the economy as a whole, while a poor monsoon leads to a sluggish growth.[14] Farm credit is regulated by NABARD, which is the statutory apex agent for rural development in the subcontinent. At the same time overpumping made possible by subsidized electric power is leading to an alarming drop in aquifer levels.[15][16][17] ..."

Having come from a rural-agrarian background and having seen the rural life from close quarters I have lot to add here to analyze what is wrong and what we as an online citizen community can do in this sphere of life.

Since this is a vast subject, I might have to post it in small chunks to keep the discussions focus and maintain clarity.

-Syed

 

kbsyed61's picture

Some good reads on this subject - Agriculture!

kbsyed61 - 10 Nov 2010 - 11:07pm
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Here are some links to good reads on this subject.

http://www.worldbank.or.jp/tokyo/02event/01seminar/pdf_ss/ss15_braun.pdf

http://planningcommission.gov.in/aboutus/speech/spemsa/msa008.doc

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.134.9232&rep=rep1&type=pdf

http://mpra.ub.uni-muenchen.de/18930/1/MPRA_paper_18930.pdf

murali772's picture

Unfortunate viewing of farmers as a liability

murali772 - 27 Apr 2015 - 5:19pm
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Agriculture matters because without a robust Bharat, India will  be a shallow economy; because it is vital for 8-plus per cent GDP growth; because by 2050 India will need 450 million tonnes of food; because Make in India needs domestic demand; because without higher growth and savings, India will be haunted by poor infrastructure; because it can enable Swachh Bharat. Agriculture matters because social and political India cannot afford to leave half its populace in poverty. - - - - The crisis presents an opportunity to the Modi Sarkar to bet on its slogan, Sabka Saath Sabka Vikas.
 
For the full text of the column by Shankkar Aiyar in the New Indian Express, click here. 
 
Arnab Goswami made an allegation the other day that the Modi Sarkar seems to treat 60% of the population, who should be seen as our "annadaata", unfortunately as a liability. Simultaneously, Chetan Bhagat wrote a column in the ToI, beginning with "With half of our population involved in farming, why can’t we provide for the kitchens of the entire world?" (for the full text, click here). I can't agree more with both, with Shankkar Aiyar, or Dr Jayaprakash Narayan, whose article of Nov, 2010, caused me to start this blog (scroll above to the opening post), in the first place. 
 
So, the thinking has been there amongst the economists and the intelligentia from long. How then has the Modi Sarkar remained blind to this approach all this while? Shouldn't it even now be making a course correction to "make India" the kitchen to the entire world first, by harnessing our abundant natural resources and tweaking of policies as required, even as we begin to create the necessary infrastructure to "make in India"?
 
And, the answer to the problem of land fragmentation, one had thought, would be co-operative farming. Here again, the question arises as to how come Gujarat, the land that gave us the white revolution through co-operatives, to make India the biggest producer of milk in the world, has not been able to replicate the same in farming.
 
Yes, the right approaches can certainly make farming remunerative. But, very obviously, the numbers dependent on it for livelihood will have to come down. However, with increased rural prosperity, economic growth in all forms can spread to the rural areas too, which is a better model of urbanisation, rather than one where rural population migrates in large numbers to existing growth centres, most of which have already grown beyond their carrying capacity. 
 
Perhaps the Modi sarkar needs to think through all of these rather than trying to bulldoze the Parliament into passing the Land Acquisition bill, more on which is debated here. 
 
Muralidhar Rao
murali772's picture

wouldn't it be best left to the states?

murali772 - 5 ಮೇ 2015 - 12:41pm
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Dwindling size of holdings, as families split and share their holdings over generations, has rendered the average holding to be only 1.31 hectare (2011 census), making it impossible to meet even the family’s subsistence needs. Most of these plots are also rain-dependent and, for those that lie in the rain-shadow belt or in the arid and semi-arid areas, cultivation is possible only once a year, thereby providing a cycle of work and production for about only six months of the year. Low productivity and the recent sharp fluctuations in rainfall have only made production more tenuous over the years. Like their neighbours and relatives, Basamma’s holding has shrunk over the years, as have the productivity and the abilities of the land to sustain them. If family partition rendered only three hectares as their share, then the demands of having a daughter married and constructing a new house saw the sale of one hectare.
 
For the full text of the column by Dr A R Vasavi in The Hindu, click here.
 
If nearly 50 per cent of country's workforce is engaged in an activity which produces only 18 per cent of its economic output, there is something that is not quite right about the entire scenario. There are way too many Indians dependent on agriculture to make a living. The situation gets even worse once you take into account the fact that most people who work on farms don't totally depend on income from the farm.
 
For the full text of the above column by Vivek Kaul in Value Research, click here.
 
All of the above, most people have come to appreciate by now.
 
So, should the Modi sarkar go ahead and push for passage of the bill, as advocated by S A Aiyar, going by the following excerpts from his column in the Sunday ToI (for the full text, click here):
 
The new bill will gain votes, not lose them in the 2019 election. The 2013 land acquisition act of the Congress had so many onerous clauses that acquisition (and related projects) came to a virtual halt across India. Economic growth and job creation crashed, so voters turned against Congress with a vengeance. Its supposedly pro-farmer measure boomeranged.
 
Modi has raised high job hopes. He cannot get re-elected without fast economic growth that creates jobs and business opportunities galore. For this, he must change the 2013 law to ensure smooth, speedy acquisition for government infrastructure and industrial corridors. Without that, the economy will not accelerate, and voter resentment at slow growth will far exceed any anger over cases of faulty acquisition.
 
Besides, faulty acquisition typically hits the electoral fortunes of chief ministers, not New Delhi. Maybe 90% of rural Indians have never met a central government official. Those they know — the police, revenue and administrative staff, canal and electricity staff — are all state officials. Even New Delhi’s programmes are implemented by state officials. So, if implementation is good, voters applaud the chief minister, not New Delhi. Similarly, bad implementation sinks the CM, not the PM.
 
I would say, even better would be to pass on the job to the states, as suggested by Shankkar Aiyar, in his column in the New Indian Express (full text accessible here), salient excerpts from which are reproduced below: 
 
To end the current impasse, the Modi Sarkar could heed Sun Tzu. It could kill the new Land Acquisition Act in Delhi and evangelise its passage in the state legislatures. The logic is simple. For all practical purposes, every square inch of India is ruled by the states. On the ground— no matter whether the law is passed in Delhi or Chennai—acquisition proceedings are processed by the collector who reports to the state government. 
 
Muralidhar Rao
murali772's picture

let's get a move on

murali772 - 25 Dec 2015 - 4:12pm
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The government may use the cooperative milk marketing template of dairy products maker Amul for marketing agricultural produce as it aims to cut out the middlemen and ensure higher remuneration for farmers.

A senior official at Niti Aayog told ET that this could be done by incentivising private players to work as integrators of fruits and vegetables.

For the full text of the report in the Economic Times, click here.

On 27th April, earlier in the year, I had written (scroll above) "And, the answer to the problem of land fragmentation, one had thought, would be co-operative farming. Here again, the question arises as to how come Gujarat, the land that gave us the white revolution through co-operatives, to make India the biggest producer of milk in the world, has not been able to replicate the same in farming".

Well, if there's an awakening along those lines, even now, it's better late than never. So, let's get a move on - there's no time to lose.

Muralidhar Rao
murali772's picture

M P example

murali772 - 1 ಮೇ 2017 - 7:32pm
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Madhya Pradesh today is a power-surplus state, and has used this surplus in innovative ways for agriculture.

Between 2009 and 2013, Chouhan worked on signing advance power purchase agreements to be used only for the wheat crop, which has a cycle of 110 days in the winter months. The government asked farmers to pay about 60 per cent of their cost of power, paying the rest in subsidies, but guaranteed daily availability, selling more than three million ‘winter connections’. Since farmers had the mechanisation visibility on the back of assured power, they could invest in their farming operations with certainty, and consequently, the area under wheat cultivation rose by two million hectares per year almost every year in this period. This power was also used to operate a well-developed canal network to pump water to distant villages, enabling even small-scale farmers to show increased yields.

For the full text (emphasis added by me) of the report in "Swarajya", click here.

Lots of lessons here for Namma Karnataka, both in the field of agriculture and power supply (more particularly, rural). Karnataka in fact was a pioneer in setting up a most workable and equitable rural power supply model, in the form of the Hukkeri Farmers Co-operative (check here). But, apparently, between the neta's and babu's, they have more or less killed it. So much so, the likes of Dr Ranganath of Bharatiya Kisan Sangha are now beginning to say that they no longer cared for BESCOM's so-called free power, but instead be supplied fully metered quality power (check here).

Power is the ATM for the party in 'power', and therefore, reforms will not happen easily. All the more the reason why the Civil Society needs to girdle up itself to take on the challenge head on.

Muralidhar Rao

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