why is the land-owning class across India waving the flag of rebellion, demanding a slice in the quota pie for education and jobs?
The truth is that the business model of agriculture has broken down.
The combination of shrinking holdings and withered returns has led to economic and, therefore, political and social marginalisation of the land-owning class.
Desperate for returns, farmers borrow high-cost capital. Unsurprisingly, 52 per cent of them are in debt.
In 1925, Malcolm Darling wrote in The Punjab Peasant, “The peasant is born in debt, lives in debt, dies in debt and bequeaths debt.” His words ring just as true in 2016. The surround sound system of India’s political economy is screaming “it’s agriculture, stupid”.
Implication of near-zero growth in agriculture:
1. demand deflation
2. poor sales and profits
3. Industrial and manufacturing growth is tepid
4. The thesis of consumption-driven, investment-led growth is grounded
5. Consumption—despite the demography and proclaimed depth of domestic market—is jittery and uncertain as income of 48% rural population is uncertain.
India’s agriculture grew at -0.2 per cent and 1.1 per cent in 2014-15 & 2015-16 FY.
Translated, half of India’s workforce, which lives off less than a sixth of the national income, had two successive years of near-null growth.
Other issues facing by farmers: fall in global farm produce prices, falling exports and near-zero support in pricing.
Consider the arithmetic of politics. Over 70 per cent of the populace and hence the biggest voter base lives in rural India. Shorn of technical definitions, 133 million households live on a monthly income of roughly `5,000.
Consider the arithmetic of economics. Growth is the outcome of consumption that drives job creation, creates incomes and fuels investment to accelerate job creation and incomes in a virtuous cycle. Unless agriculture is made viable, the aspiration for sustainable momentum will remain an aspiration.
Agriculture is not different from any business. The farmer requires operating capital, irrigation infrastructure, inputs, insurance coverage like any industry, connectivity and access to markets and a controls-free eco-system. Fact is, over half the farmers lack access to formal credit and live with usurious rates—there is much lament about farm loan waivers, but corporate loans are written off with impunity. Irrigation is essentially at the mercy of the rain gods.
Agriculture can be designed viable. How?
The Aadhar-based Jan Dhan accounts afford expansion of access—for credit, insurance and direct delivery of subsidies, and capital cost subvention. The idea of soil health tests and migration to drip irrigation systems can be on mission mode—just as it has been done in rural electrification.
The system of free power is really a regime of no power. This has led to disastrous fall in water levels as farmers are mining for water. Technology and innovation allow for flexible structures—for instance, for shifting farmers to metered power regime subsidised by a pre-paid recharge coupon system. The online national agri-produce market—Amul II, I have argued for—is taking shape, but needs a deadline. Food inflation is largely about pulses and vegetables’ output—it calls for the Centre to push states to create special zones.
If there can be PPP for roads, airports and power, why not for agriculture? India needs to confront the ghosts and institute a template for contract farming with a regulator to ensure supply-demand predictability for farmers and consumers.
At the dawn of Independence, Jawaharlal Nehru famously observed “everything can wait but not agriculture”.
There is no disputing the inter-dependence—the need to make agriculture viable for a deep and robust economy.