"A king without
power is an absurdity."
—James Monroe (American President, 1758-1831)
Word
for the day
Floriferous (adj)
Producing blossoms; flower-bearing.
Malice
towards none
Since 2011, we have
seen two mass movements - anti corruption movement led by octogenarian Anna
Hazare and Nirbhaya movement led by young students.
Both seem to have
failed miserably.
Why?
First random
thought this morning
I have travelled over 100,000kms on Indian highways, both
state, national and express, during past 5years. Many of these highways and
expressways pass through villages and small towns.
I find it strange that I did not come across any foot
over bridge (FoB) on these roads.
I did meet some highway police personnel posted on these
roads. Not surprisingly, none of them was clear about their duties. Most of
them were either sleeping in their new SUVs or were busy negotiating deals with
some truck or taxi driver.
Take factories to farms
Talking about a faster and sustainable economic
growth in India, without materially improving the state of agriculture in the
country, would be totally futile and nonsensical.
The mission of the government to
double farm income by 2020 is commendable. However, it may not be sufficient.
The farm income must rise much higher, led by superior productivity gains and
higher realization.
The measures initiated so far,
e.g., higher support prices, cheaper credit, crop insurance, improved
irrigation, cash fertilizer subsidy, better market access (eNAM, roads etc.)
have definitely improved the state of agriculture in the country. But this
improvement may not be sufficient. A lot more needs to be done, rather
urgently.
Firstly, the business of
agriculture in the country needs to be restructured; well, as a business.
A material part of the agriculture
in India continues to be a sustenance measure, not a business. It suffers from
huge disguised unemployment, underemployment and poor returns.
Secondly, the historical
transition of farm workers to industry during the developing stage of growth
may not work in current Indian context.
The so called developed economies
have transited the labor from farm to factories, when industry and mining were
still labor intensive and global competition was not much. The productivity
gains were immediate and tangible.
It is no longer the case.
The industry in India is already
capital intensive. Even traditional labor intensive industries like gems &
jewellery, textile, leather, mining and construction are becoming increasingly
automated to stay viable against the global competition. Emulating China model
may not work in India, as our political and economic model is entirely
different.
Moreover, the skill and training
requirement for modern industry do not allow a straight farm to factory
transition. So the options get limited to unskilled construction sector jobs
and building industry around farms where the skill of the farmers could be
suitable employed.
While MNREGA and ambitious rural
road program is taking care of unskilled construction jobs, there is little
effort to take factories to farms.
The ambitious Make in India
program mostly aims to substitute imports. We are trying to compete with
manufacturing powerhouses like China, Vietnam, Taiwan, etc. This defies the
basic principle of making economic decisions.
Whereas, what we need is to
promote the export traditional Indian stuff, that is our strength.
In past few years, I have
interacted with a number of farmers in India to understand the economics of
Indian agriculture. What I gathered, may be summarized as follows:
(a) In past one decade, the rise in the price of agriculture produce
has lagged the rise in land prices significantly. Consequently, the yield on
agriculture land has collapsed in most areas.
For example, in Delhi, Haryana,
Himachal, Punjab, Rajasthan, Western & central UP and many of parts of MP
the yield in now even less than the fixed deposit interest rates.
Land priced at Rs10lac an acre
yields less than Rs70000/year for a medium and large farmer. For a small and
marginal farmer the yield is Rs20000 to Rs40000 per acre/year, excluding the
cost of self labor. If we adjust the yield for one crop loss every three year,
lease rent and 24-30% interest that small and marginal farmer pays, agriculture
is completely unviable business.
If we factor in rising labor cost
and lower subsidy in input prices (fertilizer, electricity, diesel and water)
the viability gap will likely only increase going forward.
Pertinent to note here is that a
typical landless, marginal or small farmer household deploys 3-4 adults for 6
months in the farm. At ~Rs3000/month minimum wage rate the cost of self labor
itself comes to about Rs55000-75000/year.
(b) A large majority of farmers in India are landless. Many of these
farmers take land on lease. The rent varies from Rs5000/acre to 50% of produce.
A lost crop puts such farmers in a debt trap that may take up to 5years to get
out.
The next generation of landless
farmer is therefore least likely to prefer agriculture over construction or
industrial labor. Availability of agriculture labor is likely to shrink even
further from the current alarming levels.
(c) Given the low returns, the current generation of medium and large
farmers is also not much interested in taking farming as occupation. Most would
want to sell the land or convert it into non-agriculture land.
Given the uneconomical holding
size, low yields, unavailability of formal credit, and lack of interest in
large farmers, mechanization of agriculture is not happening at desired pace.
In my view, to make agriculture a viable
business and control food inflation on sustainable basis the three things need
to happen, viz.,
(a) Substantial rise in productivity;
(b) Substantial rise in price of agriculture produce; and
(c) Fall in price of agriculture land.
...to continue tomorrow
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