I write this from Cataratas, the Argentine province bordering Brazil and Paraguay, home to the world-famous Iguazu waterfalls. These are far more spectacular than North America’s Niagara Falls. Argentina, with its Evita Peron and Madres de Mayo, has fascinated me for long for several reasons. But during this first visit, two aspects strike me as being particularly relevant for us in India.
First, this nation clearly demonstrates how a domestic elite and its political class, when motivated exclusively by narrow and selfish interests, can drag down even as naturally rich a country as Argentina. Ranked among the 10 richest countries in the world until the 1930s, it is now a struggling middle-income laggard, compared with the European and North American economies that were once its peers. We face this risk in India today and must act to avoid it.
Second, courtesy our amazingly helpful embassy in Buenos Aires, I have learnt that Argentine agriculture—which is globally competitive, highly modernized and profitable—has significant lessons for India’s stagnating agriculture sector. Argentine farmers have adopted the most modern agriculture practices, including “direct seeding cultivation” that is reportedly far better for soil conservation and avoids ploughing operations, thereby saving on costs as well. Moreover, there is apparently an Argentine company called El Tejar that specializes in aggregating production from small and medium farmers, provides them with modern technologies and inputs and thereby helps them to significantly raise their productivity and incomes.
These examples should be of immediate and direct interest to India, where a second green revolution is urgently needed if we are to achieve food security and avoid the emergence of political strife on the issue of food. Yet, my apprehension is that none of these relevant global practices will find their way into Indian agriculture as long as the government has the exclusive mandate for modernizing the sector. Let us accept that agriculture today is far too important a sector to be left to the government.
For decades, the miserable state of our small and marginal farmers has been used as an excuse to direct increasingly large amounts of subsidies to the agriculture sector. These, as expected, do not reach the intended beneficiaries. The same argument has been used by Indian negotiators in the World Trade Organization to demand additional safeguards against imports and ask for deeper cuts in the subsidies paid by advanced economies. While subsidies to giant agro-businesses in the US and Europe are a scandal, it is not clear how the safeguards that Indian negotiators get stuck on will help raise the productivity and income levels of small and marginal farmers.
Surely, we need well-directed and innovative policies—and not merely safeguards—to lift these millions of farmers out of this low-income trap. Instead, it is quite evident that the current nexus of misdirected subsidies, price support, import and export controls, collapse of extension services, absence of an agricultural land market and pervasive corrupt bureaucratic intervention across the entire range of the rural economy will keep small and marginal farmers in a perpetual state of relative poverty for the foreseeable future. But this need not be so.
As the nearly three-decade-long dairy experience has shown, with private initiative and minimum official support, breakthroughs in dairy farming have made India the largest milk producer in the world. And just like in crop agriculture, dairy in India continues to be made up of very small producers, the great majority with only one or two milch cattle. This breakthrough was achieved by the National Dairy Development Board (commonly known as Mother Dairy) under the leadership of Verghese Kurien.
The same model can surely be applied to crop agriculture. A private operator such as El Tejar could be encouraged by some of our provincial governments to initiate such an aggregation process. It would start a cooperative or corporate process of renting land from a large number of small and marginal farmers, offering them higher incomes both as rents and as wage incomes. It would use the aggregated land to undertake agriculture with new techniques, rational use of inputs and benefit from the economies of scale and scope. This would help raise yields and achieve the breakthrough that can put Indian agriculture on a path of rising incomes and global competitiveness. The small and marginal farmer will be liberated from destiny of poverty, and the back-breaking labour and dependence on the corrupt officialdom that comes with it.
Is there another way forward that avoids private sector initiative and relies on a statist model to achieve such a breakthrough? I am certainly not aware of it and I invite feedback. Let us find an answer quickly because time is running out. We cannot continue relying on good monsoons and a patient poor peasantry that accepts being left behind. We need to think boldly and urgently to avoid a crisis in Indian agriculture whose economic, social and, indeed, political costs will surely be unaffordable.
Rajiv Kumar is director and chief executive of the Indian Council for Research on International Economic Relations. These are his personal views. Comment at firstname.lastname@example.org