Do Indian villagers purchase cows because they hold them sacred, or do they make economic calculations while investing in cows? Over the past couple of years, several economists have mined data on livestock costs and returns to answer that question, leading to a lively debate on the issue.

The debate was ignited by the surprising findings of a 2013 National Bureau of Economic Research working paper authored by three economists, Santosh Anagol, Alvin Etang, and Dean Karlan. Anagol and his co-authors analyzed data on costs incurred and incomes generated by those owning cows and buffaloes in two districts of Uttar Pradesh to come up with startling results: cows and buffaloes generated large negative returns for their owners, at negative 64% and negative 34%, respectively, once labour costs were factored in. The authors concluded the villagers did not behave according to the central tenets of capitalism, and offered a variety of explanations, including cultural and religious ones, to explain the seemingly irrational choice.

As an earlier Economics Express column pointed out, the findings of the study were challenged by two other economists, Orazio Attanasio and Britta Augsburg, in a 2014 NBER working paper. The duo pointed out that the surprising findings of the 2013 study had a simple explanation: drought, which affected milk production, and hence the returns to cattle adversely in the year of study.

“In computing the return on cows and buffaloes, the authors used data from a single year," Attanasio and Augsburg wrote. “Cows are assets whose return varies through time. In drought years, when fodder is scarce and expensive, milk production is lower and profits are low. In non-drought years, when fodder is abundant and cheaper, milk production is higher and profits can be considerably higher. The return on cows and buffaloes, like that of many stocks traded on Wall Street, is positive in some years and negative in others. We report evidence from three years of data on the return on cows and buffaloes in the district of Anantapur and show that in one of the three years, returns are very high, while in drought years they are similar to the figures obtained by Anagol, Etang and Karlan (2013)."

The latest economists to join the debate are Esther Gehrke and Michael Grimm, who argue in a recently published research paper that low average returns to cattle investments mask huge variations in returns among owners. Villagers with large cattle holdings and those with more productive breeds have significantly higher returns compared with those owning only a few cattle of poorer breed. Just as weather drives variations in returns across years, economies of scale drive variations among cattle owners even in the same year. Raising more cattle lowers average costs for big farmers, driving up margins. Gehrke and Grimm say raising more cattle or more productive breeds is an expensive proposition for most small farmers, which is why they are trapped in a low-level equilibrium, and earn low returns on investment. “Overall, we believe that the findings give little reason to speak of a paradox of cattle accumulation," Gehrke and Grimm say.

Gehrke and Grimm’s conclusions raise one obvious question. If investments to cattle are subject to increasing returns, why don’t rich Indian farmers rear cattle on a large scale? The answer perhaps lies in the absence of a ready market for milk and other dairy products. The lack of ready buyers or the absence of modern storage facilities tends to deter such investments. Indeed, in areas such as north Gujarat, where such constraints have been taken care of by well-functioning milk co-operatives and the availability of regular power, a new generation of cattle farmers have taken to large-scale cattle farming, as a recent report by Harish Damodaran published in The Indian Express pointed out.

The current debate over the rationality of cattle investments in India evokes an old debate on the same issue nearly half a century ago, which involved some of India’s leading economists such as M.V. Dandekar, who helped define India’s first calorie-based poverty line, and K.N. Raj, the doyen of Keynesian economists in India. At that time, many commentators, in India as well as in the West, viewed India’s huge stock of low-productivity cattle as a sign of economic inefficiency. Indian farmers were thought to purchase cows because of religious considerations (cows are held to be sacred by most Hindus) rather than economic calculations. One of the most influential studies to dispute such a view was a 1966 research paper by the American anthropologist Marvin Harris.

Harris argued that cows had many unique functions in India, such as their use in ploughing activities, which required farmers to retain their own draught animals for such activities. Harris went so far as to argue that restrictions on cow slaughter were tied to economics, and that religious norms that led to such restrictions were actually grounded in sound economic rationale.

In a scathing attack on Harris on the pages of the Economic and Political Weekly, Dandekar rubbished Harris’ thesis as an elaborate defence of cow worship “garbed in pseudo-science". Harris had argued Indian breeds were under-sized precisely because other breeds could not survive the atrocious conditions (including lack of proper feed) they face here. Dandekar objected that Harris was avoiding the central economic question: could more milk, traction and dung be produced by fewer but better-fed animals than was the case then? Dandekar argued that the answer was in the affirmative, and that the practice of cow worship actually stood in the way of a more rational utilization of India’s bovine resources.

Raj took a more empirically grounded view of the matter than either Harris or Dandekar did in his 1969 research paper on the subject. Raj pointed out that while Western observers commented on India’s large cattle to land population and attributed it to spiritual values, India’s cattle to land ratio was actually similar to comparable developing countries such as Pakistan, where the majority did not subscribe to Hindu spiritual values. Raj also showed that the large inter-state variations in the nature of bovine population could be explained by economic considerations.

In three Indian states—Kerala, Bihar and Uttar Pradesh—where pressures on land were the highest, farmers seemed to be compelled to choose between having male animals for draught purposes (for preparing land for farming) and female animals for milk, wrote Raj. In Kerala, draught requirements were relatively less important because it had relatively less land under food grain cultivation, which required such land preparation. The pattern of bovine population therefore was markedly different in Kerala as compared with Bihar and Uttar Pradesh. In Kerala, cows outnumbered bulls by far while the converse was true for the two north Indian states.

“It is interesting to observe that it is in the Indo-Gangetic valley (particularly in the States of Uttar Pradesh and Bihar), where Hindu orthodoxy is deeply entrenched and the sentiment against the killing of cows is strongest, that the pressure of human and bovine population on resources makes it most necessary to get rid of cows in preference for bulls for traction purposes and she buffaloes for milk," wrote Raj. “It is also significant that two of the States where cows are preferred relatively to bullocks (namely, Kerala and Kashmir) have higher percentages of non-Hindus among their population than any other State. Obviously, religious sentiment has not much to do with the actual preferences of the people and the treatment meted out to cows in India. The recurrent agitations against cow slaughter appear to be based on such sentiment and on the desire of political parties to exploit it for their own purposes, in either case not on any realistic understanding of the economic interests and actual behaviour of the people who would have to support the unwanted cattle."

The only role religion played in the cattle economy was in determining the method of getting rid of unwanted cattle. Rather than sending cows to slaughterhouses, north Indian farmers preferred a method of slow death through deliberate starvation.

“How does the table get turned so dramatically against the cows in Bihar and Uttar Pradesh? Obviously, killing must be taking place, but perhaps the main technique adopted for getting rid of the cows is infanticide and deliberate starvation. For it is clear that, in the cattle population below 3 years of age, the number of female to male animals is much higher than in the adult cattle population in both Bihar and Uttar Pradesh," wrote Raj.

Raj also pointed out that while cattle farmers living close to urban settlements were likely to keep more and better breeds of cattle because they could sell dairy products in nearby markets more easily, villagers in remote areas were likely to invest in fewer, less productive, and cheaper cattle as the milk generated would largely be used for self-consumption.

The latest findings by Gehrke and Grimm seem to complement Raj’s insights in explaining why so many Indians farmers invest in low-yielding cattle. Evidently, economics rather than religion dictate such choices.

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