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Business News/ Budget 2019 / Budget Expectations/  India needs a new deal for rural India

India needs a new deal for rural India

The Modi government has to urgently bridge the urban-rural divide. Here’s where it should begin
  • Welfare funding does not cure or address the root cause of poverty. It only treats the symptoms. The root cause of poverty is about lack of skills and economic opportunity
  • Poverty in rural India is rampant, with the average annual earnings of a small and marginal farmer household at ₹79,779 in 2015-16. Photo: PTIPremium
    Poverty in rural India is rampant, with the average annual earnings of a small and marginal farmer household at 79,779 in 2015-16. Photo: PTI

    As our economy grows—sometimes rapidly and sometimes hesitantly—the transformation is evident to all, whether or not they are included in India’s development. Fuelled by accelerating urbanization and widespread access to information, aspirations are evident across all sections of society. When these are not realized, it stokes a sense of resentment among the disadvantaged. In this highly disruptive phase of India’s history, we must therefore ensure that the benefits of economic growth reach every single citizen of India. If not, if inequity reigns and hopes die, our efforts to create a prosperous India will not bear fruit.

    Some of the misplaced economic policies in the recent past have excluded a majority of rural society from partaking in India’s journey of development, resulting in a sense of deprivation and dissatisfaction among a large percentage of people in the Indian villages.

    Poverty in rural India is rampant with the average annual earning of a small and marginal farmer household at 79,779 in 2015-16, according to the Committee on Doubling of Farmers’ Income. The disparity in per capita rural and urban income has remained persistently high, with an average urban worker earning over eight times an average agricultural worker, according to NITI Aayog discussion paper Changing Structure of Rural Economy of India, Implications for Employment and Growth.

    The widening urban-rural divide is also evident in the inequalities in consumption, quality of life, and availability of physical and social infrastructure. To ensure inclusive economic growth, the government needs to urgently focus on transforming the agrarian economy to pull the maximum number of people out of subsistence farming and give them a much more remunerative role.

    With two-thirds of India’s billion-plus people living in villages, jump-starting the economic engine of rural India will have a multiplier effect on investment, consumption, government expenditure and exports. The potential of rural India can be gauged by the fact that agricultural startups have raised nearly $130 million in about 70 deals in the past five years to 2018, according to a news report.

    The Narendra Modi-led government has its task cut out. It will need to focus on agri-technologies that can boost agricultural productivity, create value-added farm products and tap “farm-to-fork opportunities" to ensure better realization for farmers. It will also need to create millions of micro-entrepreneurs and thousands of economic clusters in rural India, besides investing in rural roads, rural electricity, irrigation networks and national cold chain grids.

    Loan waivers need a rethink

    India urgently needs to rethink its current prescriptions for alleviating rural distress, most of which are in the form of either doles or loan waivers. These have mostly failed to reduce poverty and ensure income security for a majority of Indians employed in farming. There are numerous reports of farmer suicides from across the country even as per capita income of farmers has grown marginally. The Accidental Death and Suicide in India report for 2015 showed that every day at least 34 farmers committed suicide in India (12,602 suicides in the year), mainly because of bankruptcy or indebtedness.

    We should change the way we are looking at using welfare funding. Welfare funding does not cure or address the root cause of poverty, it only treats the symptoms. The root cause of poverty is about lack of skills and economic opportunity. So welfare funding should be directed at removing these roadblocks in the path of sustainable rural development.

    Let us take the Mahatma Gandhi National Rural Employment Guarantee (MGNREG) programme, which provides at least 100 days of guaranteed wage employment each fiscal year to every household whose adult members volunteer to do unskilled manual work. Does the programme ensure sustainable livelihood for the remaining 265 days of the year? Are the wages enough to lift them out of poverty? Is the programme helping upskill these rural workers? The answer to all these questions is no.

    Instead of labour-oriented job creation, the MGNREGA should push knowledge-led job creation, which is to say the programme should encourage farmers to learn about technology, and it should apply technology to increase their earning capacities. In this day and age, using labour to dig wells or lay roads is really not a very smart way of using human capital. Unless human capital is empowered with knowledge and skills, we will waste a huge resource. This is why the MGNREGA needs a reboot. Instead of looking at the rural workforce as labourers, our policymakers should approach them as a key human resource.

    Need for entrepreneurship

    To re-energise the rural economy, the Modi government has been trying to bring in some policy reforms like e-markets, farmer producer organizations (FPOs) and the Model Contract Farming Act, 2018. As Indian farmers have the smallest landholding on the planet, they lack individual bargaining capacity in the open market for their small produce. In such a scenario, the creation of FPOs can give them a competitive edge because they can pool in their produce, invest in cold storage facilities and better negotiate with large buyers.

    At the same time, I believe FPOs need to go beyond just being “farming cooperatives" and transform themselves into thriving entrepreneurship clusters. The FPO model should be expanded with a large number of incentives. The government needs to step in to create a few model FPOs in the country. An official from the agricultural ministry can play the role of an enabler and facilitator in these model FPOs and ensure they get access to tax and other incentives. A prudent plan for FPOs will encourage agricultural entrepreneurs to go ahead and emulate the success of the famous milk cooperative brand Amul.

    FPOs can be a great model for value-added agriculture. For example, an FPO of farmers who produce ragi or finger millet, a popular staple in the diet of a large number of people in Karnataka, can start creating value-added products from their crop. In fact, with the Karnataka government promoting ragi as a new superfood, comparable with quinoa, there is a great opportunity for an FPO to look at making value-added products like ragi health drinks, multigrain noodles, ragi biscuits, ragi vermicelli etc. An entire micro-entrepreneurship cluster can come up to supply to a ready urban market, thus ensuring a long-term, sustainable source of income for the farmers.

    In fact, these FPOs can tie up with business schools to build the knowhow for developing a robust entrepreneurial ecosystem that leads to the creation of a vibrant rural economy. If we can create villages that can directly sell produce to global markets then we will see the ripple effects of a micro-entrepreneurial economy flowing through rural India.

    Making rural folk tech savvy

    While smart government policies, financial inclusion initiatives and investments in infrastructure can help, greater use of technology can fire the entrepreneurial spirit and spur innovation in rural India. Technology can also help farmers access high-quality inputs, crop health and yield data and crucial weather related information. Adoption of advanced agriculture technology through machines and equipment that use data analytics, Internet of Things and robotics can help optimize inputs and enhance yields. Moreover, using technology and data science can help build more efficient supply chains that connect retail grocery stores with food processors and FPOs.

    Social media platforms can help connect farmers to the larger economy. If WhatsApp messages can reach every single voter in India, the platform can be used to educate farmers, transform them into micro-entrepreneurs and connect these rural entrepreneurs to national and international markets. Greater access to technology has already led to the emergence of social enterprise startups that are coming up with apps to help improve the lives of rural folk. A greater push to these startups can reap rich dividends.

    Using biotech in agriculture

    Although agriculture contributes to about 17% of India’s gross domestic product (GDP), its significance to the people of India cannot be overemphasized. In addition to feeding the country, agriculture has nearly half of our 1.3 billion-plus population depending on it for their livelihood. The bad news is agricultural growth is slowing. Between fiscal 2014 and 2019, agri-GDP grew at 2.9% per year compared with a 3.7% per annum growth between fiscal 2005 and 2014.

    At the same time, climate change threatens India’s crop production. While the extreme rainfall events have become frequent and more variable, the severity and frequency of droughts has also increased since 1970s. The application of biotechnology can optimize the use of available resources without placing additional demands on land or water to boost yields, which is what India needs. These solutions, which can be easily scaled across the country, can improve the quality of the produce with disease-free and nutritionally enhanced varieties of crops.

    Biotechnology can also generate economic opportunity, investment and employment in the agriculture sector through the development of new varieties of crops, new uses for crop residues and waste, as well as, supporting the development of new markets for farm produce. It offers huge potential to drive improvements in agricultural productivity and profitability, thus providing opportunities to ensure economic well-being of the farmer along with food security for the nation.

    The Indian government has set up several centres of plant molecular biology and crop biotechnology. Moreover, numerous agricultural universities in the country have started their own biotechnology programmes with financial support from local governments, and national and international funding agencies. Agri-biotechnology is being applied across poultry and dairy farming, fisheries, floriculture, horticulture, the food processing industry, and genetically modified (GM) technology.

    Indian farmers who opted for Bt cotton, which is the only GM crop allowed for commercial cultivation in the country, benefited from higher yields and reduced pesticides use. Over 90% of the country’s cotton growing areas is today under Bt Cotton, and India has emerged as the largest producer and second largest exporter of cotton in the world. According a recent article by well-known agricultural economist, Ashok Gulati, India gained about $67 billion in foreign exchange from extra exports of cotton and cotton yarn, and savings in imports, over FY03-FY17. Importantly, incomes of cotton farmers doubled due to adoption of Bt Cotton.

    The case of Bt Cotton has amply demonstrated that the responsible introduction of GM crops can be one of the most potent ways of increasing productivity of crops in this country. Yet, fearmongering by activists over the bio-safety and environmental safety of GM crops has led to a hostile policy regime towards this technology. Apart from GM crops, agricultural biotechnology is leveraging molecular markers in crop breeding for the selective propagation of genes that improve yields and resist disease. Micropropagation is another area where biotechnology is helping produce pathogen-free plants and address soil imbalance issues.

    Unfortunately, biotechnology itself faces several challenges. While the government understands the importance of food security, it needs to translate this understanding into action through the effective use of biotech. Instead of putting up regulatory roadblocks, it must pave the way for agricultural biotechnology.

    Even as we move on the policy front, we must also bridge the huge knowledge gap in Indian agriculture between farmers on one side and crop scientists on the other. Farmers should be trained on micro-irrigation, micropropagation, latest farming technology, smart use of fertilisers, better understanding of crop rotation etc.

    To conclude, to kick-start the rural economy, we must formulate policies that focus on helping people emerge from an existence of perpetual disadvantage through incentives not hand-outs. A bridging of the urban-rural divide is imperative for long-term sustainable growth of the economy.

    Kiran Mazumdar-Shaw is chairperson and managing director of Biocon Ltd.

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    Published: 04 Jul 2019, 09:16 PM IST
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