25 years of change: Why India’s farm sector needs a new deal
In chasing higher and higher GDP growth rates, India tends to gloss over two vital facts. One, farm growth cuts poverty twice as fast as industrial growth. Two, a 1% rise in agricultural output raises industrial production by 0.5% and national income by 0.7%, according to one calculation. In other words, the country’s fortunes are structurally tied to its farmers.EconomicReforms25YearsOfChange Updated: Jul 26, 2016 00:20 IST
In chasing higher and higher GDP growth rates, India tends to gloss over two vital facts. One, farm growth cuts poverty twice as fast as industrial growth. Two, a 1% rise in agricultural output raises industrial production by 0.5% and national income by 0.7%, according to one calculation. In other words, the country’s fortunes are structurally tied to its farmers.
Two-thirds of Indians rely on a farm-based income. A back-to-back drought last year led to a challenging farm duress. Rural incomes fell. Food prices soared. Farmers fretted. Yet, these effects are mild and nothing compared to a previous era.
During 1965-66, a similar consecutive drought had put India on a knife’s edge. Food output dropped 36% in those two years, data shows. All through the 40s, 50s and 60s, famines were common. Millions died.
Many predicted another killer famine. Economists Paul and William Paddock prophesied a Malthusian horror of population rising faster than food output, declaring countries like India “foredoomed”.
India signed off on an agreement with the US called the “Public Law 480” to qualify for food aid. It was not just humiliating. With a Cold War on, food assistance was a political hazard because aid came tied with conditionalities. A taste of this came when the US stopped desperate wheat shipments for 48 hours right in the middle of the drought.
To end this dependence, India began putting together a policy framework, led by then farm minister C Subramanium. A breakthrough came when the country got hold of a fertiliser-responding high-yielding spring wheat variety from CIMMYT, an international farm research organisation. A similar variety of “Indica” rice came from the Philippines-based International Rice Research Institute.
Nearly 18,000 tonnes of their seeds were dispatched to food-bowl states of Punjab, Haryana and western UP. Along with minimum support prices, fertilizer subsidies and irrigation cover in these pockets, an incredible green revolution took off. Within years, the results showed. India became self-sufficient in food grains.
But that’s about all India’s agriculture has been able to achieve. While subsidies were critical, overdependence on subsidies over investment was to be a costly mistake.
“The Green Revolution was actually only a wheat revolution. The technology was limited, the areas to which it was applied were limited, the crops were limited and the farmers who benefited were limited,” said Uma Kapila, an economic historian who taught at Delhi’s Miranda House college. “We all know growth requires investment. Over a period of time, we focused on subsidies at the cost of investment.”
Policymakers basked in the glory of the Green Revolution for too long, without realising the technology had run its course. The first signs of the Green Revolution diminishing emerged in the mid-1980s, when yields began falling. Today, India exhibits the lowest yields globally. Overall, the lowest returns from public subsidies were in agriculture, whereas investment was low.
The rate of investment in agriculture in the 80s and 90s was between 8-12%. These years roughly coincide with the 6th and 10th five-year plans. With such low spending in agriculture, except for input subsidies, farm growth hobbled at 2.4% or so.
In contrast, public investments, along with reforms, in other sectors were over 35%. This low-investment phase in agriculture was reversed only with the 10th and 11th five year plans (2002-07 and 2007-12).
Even today, irrigated lands make up only 40% of the country’s arable land, making 60% of the net sown area vulnerable to monsoon failure.
Higher farm output, the solution for more incomes with less farmhands, hinges on area and yields.
The government has already tapped the easy areas, the ones most fertile and better irrigated. Area expansion has its limitations. “We can no longer expand the area. The only way to go is to raise yields,” says Kapila.
Farm investment has now reached 20% or so of the GDP, but most of it comes from the private sector. While experts recommend more private participation, they say public investment must also go up.
The consequences of a fading Green Revolution and a skewed farm policy are now showing up in politics. The violent agitations by Jats in Haryana and Gujjars for a sliver of India’s reservation pie are instances.
Traditionally pastoral communities such as the Jats and Gujjars in northern states and even Patidars in western India benefited greatly from the Green Revolution’s farm subsidies. The Jats participated heavily in the 1857 War of Independence, resulting in the British co-opting them with a lot of quasi-ownership of land. They thus acquired the bhumidhar (land-owning) status. Over time, this led to their dominance.
Falling returns from agriculture at a time of higher economic growth could lead to more unrest. A 2014 survey by Lokniti found that nearly 40% farmers were so disillusioned that they wanted to abandon farming. Where do they go? On to the streets?