The Unrealised Potential of Rural India

The Unrealised Potential Of Rural India

In Gangster Squad,  based on a true story starring a laconic Sean Penn, a little crew of crack policemen is set up to destroy Micky Cohen’s business operations. Cohen is a Jewish racketeer from 1949, with a yen to “own” Los Angeles.

In a stylish scene from the movie, the best marksman in the cop squad, nicknamed “Hopalong” by his colleagues, advises his admiring Mexican junior: “Don’t shoot where it is son, shoot where it’s going to be”.

The Indian agricultural sector may be very largely primitive, still in the bullock and plough era, and pathetically, back-breakingly, underproductive, but it does feed a population of 1.2 billion. We are not living on food aid anymore. In fact we export various food surpluses nowadays.

A new joint study by the Confederation of Indian Industry and McKinsey & Company, says if agriculture was made more productive: via massive capital investment in infrastructure, irrigation, yield technology and processes, plus strong technological upgrades and collectivisation/cooperation; food inflation would cease to feature so readily amongst our problems.

There would be a lot more to go around.  Ergo, a supply- side economic solution!

But, of course, it would require more efficient systems and policies too. More fruit and vegetables would need to be disbursed with volume sales, and quickly, as we are dealing with a perishable commodity. And a much better involvement and integration with infrastructure, and food- processing must account for greater than the present 10% figure. Besides, with changing demand trends towards more meat, chicken, eggs, and fish, scientific agricultural techniques to improve quality and yield have to be employed there too.

The Socialist system of minimum guaranteed prices to farmers, which implies and often involves a subsidy, as it varies from market prices, would have to be phased out, and replaced with a productivity bonus. Besides it distorts the pricing at retail level too. Volume sales would have to rule, as unit prices would drop because of the bountiful crop, better infrastructure, etc.

Since 60 per cent of India still “lives in its villages”, it is high time something was done to boost farm income and contribution of the agricultural sector towards GDP. What was once a significant percentage of the total in the infancy of this country, when not much else was happening, now lags at 14% of the total per 2012 figures, and is dropping still.

That means 0.72 billion people, the masses who live in rural India, contribute just 14% of roughly $1 trillion of the official Gross Domestic Product. If you assume the actual economy to be twice as large including the cash portion, this figure would drop to 7%.

Mahatma Gandhi probably never expected India to show signs of capitalist muscle, in his lifetime, or in the misty future. It is surprising in hindsight he thought that way, for so sagacious, shrewd and far-sighted a man in other respects. But perhaps the Mahatma was merely playing to his biases as is all too human.

The economist in bar-at-law MK Gandhi wanted fervently the village to be a viable economic unit and the hub of modern, independent India, rather than its cities.

He might not have anticipated or even accepted that development, and aspiration, would see a steady migration of the rural population to urban India.

However, today it stands at 40% urban and 60% rural, but the future tilt is in favour of the city as it has been from the very start. In the US, one of the greatest agricultural producers in the world, and the largest by far in certain staple items of farm produce, such as wheat, only  1% to 2% of the population of 313 odd million, plus a huge array of machinery and technology, manages this feat.

Of course, The US uses huge subsidies too, but the approximately $ 20 billion it gives out per annum, is efficiency/yield based, and designed to keep the farms producing massive quantities of food. In 1930, some 25% of Americans lived on farms, but no longer.

In India, our farm subsidies amount to  a subsistence dole being handed out to 60% of an under productive population! And then we have so many other welfare programmes to further compound the problem.

At present Gujarat is the only state that has shown double digit growth in agriculture.  While the national averages for agricultural growth are in the poor 1% to 3% band. This shows the way as to what can be done with the right policy support.

A political class that harps on the plight of the rural poor without doing very much to alleviate their misery is patently fraudulent and self- serving. And the selfishness is all the more diabolical if we understand that the real agenda is to keep the rural population permanently poor while purporting to help them in multifarious ways. Even if the desire is sincere, the methods adopted so far have not succeeded. 

We need, says the above cited report, a fully functional “national cold chain”. This calls for massive state to state and state to centre cooperation. It needs to supersede many provisions of the Agricultural Produce Marketing Committee Act administered by the states, which place various restrictions on farmer freedom of action.

But more fundamentally, we need to up the ante to a double digit growth in agricultural output across the country and all that this implies. This will result in a new Green Revolution just as potent as the earlier one that has made us food sufficient several decades ago, or the White Revolution that has us produce the greatest amount of milk in the world now.

The Private Sector needs to be attracted to make this happen on the back of benign support from the Government.    

(956 words)

April 14^th, 2013

Gautam Mukherjee