Home >opinion >Giving up agriculture
Photo: Mint
Photo: Mint

Giving up agriculture

Farmers will need to movesooner or laterto more productive manufacturing or service sector employment

While the main opposition parties agree on little, they have found common cause in opposing the Narendra Modi government’s amended land acquisition bill. Those who object philosophically to the amended bill’s weakened consent and social assessment requirements have, at least, a theoretically tenable argument—although, in practice, there is a strong utilitarian case that the development and social welfare benefits of a more efficient land acquisition process outweigh, and therefore legitimate, the partial curtailment of individual liberty which occurs when the government exercises its eminent domain powers.

This philosophical debate, however, has little to do with the opposition parties’ actual approach, which is cleverly to shift the debate from whether the government’s land bill will, or will not, be good for farmers and the poor, to a generalized lament about the issue of farmers in distress, farmer suicides and so forth. This sleight of hand allows the likes of the recently returned prodigal prince, Rahul Gandhi, and the populist firebrand, Arvind Kejriwal, to sidestep neatly a sensible debate on the pros and cons of the bill, while instead trying to tar the government as uncaring towards the poor.

Whether taking a leaf from the old, populist playbook represents good politics for a rhetorically resurgent opposition remains to be seen; that it can only lead to poor public outcomes is self-evident. For a fixation on farmers in distress—while making for arresting imagery and evocative sound bites that tug at the heart strings—entirely confuses cause and effect, and fails to draw the correct lessons from India’s idiosyncratic development experience.

That farmers are, indeed, in trouble, is not in dispute. This newspaper’s rural distress index—which is likely to tick perilously upward if India experiences a second wayward monsoon in a row—makes that abundantly clear. The real question is: why are so many people farmers, who shouldn’t be?

Consider the staggering statistic that, in India, according to the most recent data from the World Bank, fully 47% of the population is engaged in agriculture, which contributes a paltry 18% to gross domestic product (GDP). Compare this to (say) Indonesia, where the statistics are 35% and 14.5%, respectively. Meanwhile, in advanced economies, farmers typically account for 1-2% of the population and contribute a similar share to GDP. It does not require a doctorate in economics to realize that farming in India is vastly inefficient and unproductive, and that millions of workers will need to move—sooner or later—to more productive manufacturing or service sector employment. (Whether this sectoral transformation will also require a large population shift from rural to urban areas, as has occurred in China, or whether manufacturing and service industries can spring up in the erstwhile rural hinterland itself, is an interesting, separate debate.)

Unfortunately, a well-known feature of the Indian growth experience is that, due to the halfway reforms undertaken in 1991 and thereafter, growth in India has been driven by capital-intensive high-tech manufacturing and services—not large-scale, labour-intensive manufacturing, as in other large emerging economies. Such deformation in the Indian growth experience is a direct result of liberalizing product markets while failing to liberalize factor markets.

This has resulted, further, in an economy which has grown rapidly and generated considerable prosperity for those lucky or skilled enough to be employed in the urban organized sector, while trapping millions in a cycle of poverty, destitution and debt on ever smaller and less productive parcels of land in the blighted countryside. Rather than offering farmers a way out—by eliminating policy distortions which retard the growth of labour-intensive manufacturing and service sector activities, and thus creating an economically viable avenue for the movement of surplus labour away from agriculture—successive governments have found it politically irresistible to squander vast resources on every possible scheme to chain farmers to the land.

It is difficult to measure precisely the annual cost to the exchequer of the direct and indirect subsidies to agriculture, but the figure is on the order of several trillion rupees. This is to say nothing of the fiscal cost of periodic farm loan waivers by central or state governments, which prove useful in the run-up to elections.

While slashing these schemes in the first instance is politically difficult, the way forward for the Modi government is partly through the land bill itself, which will make it easier to acquire land for development and infrastructure, and which, therefore, may help to hasten the movement of at least some farmers off unproductive land which has greater utility in another use. That is on the supply side of the labour market. On the demand side, the panoply of reforms and initiatives under the ‘Make in India’ umbrella, if successful, will boost labour-intensive economic activity, and thus create gainful employment and income-generation opportunities for farmers wishing to leave the land.

We must not inure ourselves to the stark imagery of farmers in distress—and also must draw the right lessons.

Every fortnight, In the Margins explores the intersection of economics, politics and public policy to help cast light on current affairs.

Comments are welcome at views@livemint.com. To read Vivek Dehejia’s previous columns, go to www.livemint.com/vivekdehejia--

Subscribe to newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperLivemint.com is now on Telegram. Join Livemint channel in your Telegram and stay updated

My Reads Logout