Enhancing Farmers’ Livelihood And Ways Of Doing It
We have had four successive seasons of below average rainfall and farm incomes have been in stress. When we talk about agriculture, we need to ask: why agriculture? There are two broad reasons why agriculture is so important in India.
There are intrinsic reasons and instrumental reasons.
Intrinsic reasons
1. Forty-nine percent of India’s workforce is in agriculture or gets its livelihood from it.
2. Depending on whether you are talking about agriculture or rural sector, somewhere between 40-50 percent of households derive their sustenance from agriculture.
3. Around 80-82 percent of India’s poor are in agriculture or/and rural sector.
4. Agriculture provides food security.
Instrumental reasons
1. Agriculture has the power to hold back the economy as a whole. For example, Inflation is affected by agriculture. Food prices are pushing up retail inflation. This affects the growth because had the inflation been lower, interest rates would come down.
2. Power pricing in agriculture affects the cost of electricity for manufacturing.
3. The credit we provide to agriculture affects the rest of the economy.
Why agriculture?
The attention on agriculture that we see has been determined by these proximate factors. We think of agriculture in these times from a gloomy perspective. But the story of Indian agriculture is not of failures. It is a story of many successes.
Successes
1. The Green Revolution: Imagine the days of drought in the 1960s and dependence on import for food. This revolution changed all that.
2. The White Revolution: The conventional wisdom has been that foreign aid, especially in the form of cheap food items has had very detrimental impact on poor and developing countries. But White Revolution experience repudiated this general rule where cheap food items like milk, milk powder were used to develop the local food sector. And the rest is history.
3. Six to seven years of commodity price boom induced dynamism. We know that in some ways agriculture had it relatively good because of high international prices from 2007 onwards.
4. There has been a real spread in geography and composition of agriculture dynamism. If one remembers, Green Revolution was all about Punjab, Haryana and some southern states, but in the last 10-15 years it has spread to Gujarat (cotton), Maharashtra (horticulture), West Bengal (maze), Madhya Pradesh and to some extent Bihar.
5. Our agriculture has become much more resilient. We had very little rainfall in 2015 but the food and agricultural production was good. This would not have been possible 10-15 years ago.
Challenges
1. To increase farmer incomes and improve their livelihoods you have to increase agricultural productivity.
2. China is 3.7 times, Brazil seven times, Europe 52 times and the US is about 100 times more productive than India. The distance we have to cover for agriculture to become a source of real farmer livelihood is vast.
3. People also have to move out of agriculture to other sectors. The story of development all over the world is a story of moving away from agriculture to much higher productive activities. There are certain limitations to agriculture in the long run. If you want people to become richer, they have to move to high productive activities; but they must move out of agriculture under good conditions.
For example, Rs. 1.1 lakh is the per capita GDP of the Krishna district in Andhra Pradesh. It is very low. Even a fertile place like the Krishna district, which is very well run, has average incomes which are low.
Farmers also need to be protected against volatility and risk. India and China are highly volatile but China has improved greatly in the last 10-15 years. Now, we have our work cut out. India has not only to boost productivity but also to cushion farmers against the downside. What the government is doing, in terms of crop insurance, is critically important for this purpose.
The Ghost of Malthus
India has to achieve these two objectives of higher productivity and insuring farmers against risks, against the backdrop of what we can call the ghost of Malthus. There is no question that basic agricultural resources like water, land, soil quality atmosphere are becoming scarce and scarcer. It’s partly because of climate change and partly self-inflicted.
What needs to be done
1. The Green Revolution and 2007 boom relied on getting more from more: You put more fertiliser, you get more output. But now because of the changing environment, we have to rationalise input whether it is fertiliser, land or power. Our aim should be to get more from less. It was the agricultural services as much as the technology which contributed to the Green Revolution.
2. We need to create one market. The National Agriculture Market (NAM) that the government is working on is moving in that direction.
3. We have to reduce the role of middlemen.
4. We need to strengthen crop insurance.
5. Small holdings of land come in the way of agricultural productivity. We have to work on land consolidation.
6. We should increase the role of science.
7. India needs a rainbow revolution in pulses.
8. Policy uncertainty should be done away with. When farm prices are low, we adopt a set of policies, etc. When they go up, we adopt a different set of policies. This uncertainty ends up hurting farmers.
9. We need to strengthen institutions – Indian Council of Agriculture Research, Food Corporation of India, etc.
10. We need to rationalise agricultural credit. Is it going to small farmers? Is it too much? Is it really going to agriculture? These are all very important questions and there is a lot of scope for improvement in these areas.
Meta-questions before solutions
Many people say we must have better water conversation and we must have policy certainty. But why has it not happened already? Why is a good agricultural policy not good politics at state level? In Madhya Pradesh, Gujarat, Bihar and West Bengal agriculture did very well and the governments were re-elected. But why is it not happening more widely? These are simple-minded questions.
The bigger puzzle is that the wants and basic material well-being of millions of farmers need to be catered to. Why is it so difficult to phase out Agriculture Produce Market Committees when we know that benefits will accrue to lots of farmers? Why can’t the demonstrable success of BT cotton in Gujarat be extended? Why is there a fear of private sector despite the many successes which were private sector driven like maize, BT cotton, millet and bajra? We are still hesitant about embracing markets in agriculture.
Fertiliser policy in India ends up hurting the farmers because of black markets which hurt small farmers more than big farmers. What needs to be done in agriculture needs to be done through electoral politics.
Government and Talent
The result of the last two years and the general rule that crisis leads to change has been true. This government has spent a lot of time on how to spend on agriculture. We have been very mindful of the fact that we needed to incentivise pulse production. The opening up to FDI for agriculture, Krishi Sinchai Yojana, Crop insurance scheme etc. in some ways have led to a significant response in terms of addressing agriculture problems.
If we have two good monsoons, the temporary improvement in agriculture might lead to people forgetting problems in the long term.
Somewhere along the line, agriculture lost its significance and now it does not resonate enough as it used to. It may have to do with the talent attracted to agriculture. How do we attract the best talent? What happened to the icons like C Subramaniam, K N Raj, Raj Krishna, Verghese Kurien? Unless we get such talent back, we are going to struggle.
Resurrecting farmer livelihoods in India has to be a top priority as a whole – only the best talent can do it.
Receive Daily Updates
Recent Posts
Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.