Indian Agriculture Sector, at Cross Roads!

As the gods of nature disfavor their source of identity and livelihood, a major division of Indians who are associated with the agricultural sector are standing at the crossroads of despair, revolution, vision and opportunity. The political fortunes associated with this ill-informed majority are attracting all varieties of shrill politics, further muddying the national debate on this key aspect of national interest. This article attempts to present various dimensions of this national problem so readers are better informed, and aims to contribute towards a more positive debate and a more purposeful national strategy. The need of the hour is a national vision that views India’s agricultural sector as an opportunity, rather than the cynical political ideology that is trying to throw this ill-informed sector into rhetorical despair and inspire rebellion against a democratically-elected government.

India’s Agri-Sector problems are multi-dimensional and are impacting both bottom-line efficiencies and top-line opportunities of national development. Each of these dimensions individually require focused study, and when they are intertwined the way they are, they require even more careful strategic management. Superficial analysis of such complex problems will only lead to an incorrect understanding of the problem and the deployment of knee-jerk strategies that, in the long term, will only lead to harm to national interests.

Definition of Agriculture

First of all, there is no comprehensive definition or policy regarding the agriculture sector in India. There is no clarification for whether fisheries, poultry, animal husbandry, medicinal herbs, commercial timber, or other forest products fall under the scope of the agriculture sector, and there is very little policy on how to address the natural inter-dependencies of all these sub-sectors. For example, a sudden change in a region’s agricultural produce (say, from rice to medicinal herbs or commercial timber) may have a devastating impact on that region’s animal husbandry ecosystem. A policy decision to encourage beef-production/exports may cause the extinction of low-milk producing but drought-tolerant native cattle species, causing permanent damage to our ecosystem. These complex inter-dependencies demand attention, else disaster strike. By conceptualizing the ecosystem as a complete system and designing healthy relationships between agricultural products and practices, India can identify new top-line opportunities in the agriculture sector, and make it a pivotal part of India’s transformation towards a renewable economy.

Food Security of the Nation

A second dimension of this problem is the food security of the nation. Not all sectors of the nation are suitable for pursuing blind comparative advantages, and the food security of the nation is one such area. While India achieved food production self-sufficiency decades ago, one-third of Indians are still suffering from malnutrition. A solution for this chronic national problem must travel on a sound logistical and food-processing roadmap to achieve this necessary bottom-line efficiency.

Farm Size and Ownership

Another core aspect of India’s agri-sector landscape is the limited farm size. A study conducted by S. Mahendra Dev presents that “there were about 121 million agricultural holdings in India in 2000-01. Around 99 million were small and marginal farmers. Average size has declined from 2.3 ha. In 1970-71 to 1.37 ha in 2000“^[1]. Given this scenario, there are two approaches to reducing the labor involved in this sector – (a) make mechanical farming accessible and affordable to small farmers or (b) allow people to accumulate large farms to absorb the high cost of mechanization. Unfortunately, the second strategy goes against a different socio-economic policy called the “Land Ceiling Act”, which limits agricultural land ownership to 5-45 acres based on various factors. Those who want to mimic the success of agricultural reforms in countries like the USA must remember that the average farm size in 1900s America was 147 acres, making the base conditions for reform very different.

Labor Force excess-capacity

Then there is the problem with the labor excess capacity in the farming sector. Studies put nearly 60% of 600-million person labor force as dependent upon the farming sector. However, some of this labor force is not involved in the farming sector not out of choice, but due to a lack of skills and opportunities to move into the industrial and service sectors. Thus, reducing the percentage of the labor force in the Indian farming sector to the levels existing in industrial nations would require facilitating the transition of nearly 300-million working-age people into the industrial and service sectors. To put things in perspective, this would be a feat similar to building a new America, from the ground up, in India without adding a single inch of land or any natural resources.

National Sample Survey Office (NSSO) studies estimate that nearly 60 million jobs were created between 1999 and 2004 whereas only 15 million jobs were created in next eight years (2005-2012). Assuming that the Modi government repeats the performance of the previous NDA1 government, it would take at least 25 years (that is, from 2015 to 2040) to transition the labor-excess capacity from farming to industrial/services sectors, even if we freeze the population growth and demographic trends at today’s levels. But, given the current demographic trends of the Indian population, India will gain more than 350-million working-age people while losing only 150-million people to retirement, thus adding an additional 200-million labor-force people to the agri-sector labor excess capacity problem. The underlying truth is that no matter how quickly India industrializes, it will have to live with its farming-labor excess capacity for at least the next 20-25 years, with the majority being in the 40-70 age group, and therefore too late in life to acquire new skills.

I have done a study in 2010 (posted in Bharat Rakshak Forum ^[2]), and calculated that it will cost up to $2 trillion to retrain and employ 150-million of the agricultural sector labor into industrial sector labor. This cost estimate covers both retraining costs and the capital required to set up industries that would provide permanent employment. If the target is to transition a 300-million workforce, then the cost would double to $4 trillion, two times the current GDP of India.

Another factor that has yet to be considered is what will this gigantic industrial base, consisting of 200+ million labor force, produce? How much resources will it process annually, and who will consume its product? This is where the three slogans: Make in India, Made in India, and Made for India have to merge and transform into India’s national power.

Genetically Modified Organisms Vs Organic Products

An additional technological, and even ecological problem we need to solve is whether the Indian farming sector should take the path of GMO crops or Organic farming. Interestingly, the majority of cotton-farmer suicides in India are attributed to the so-called “GMO-terminator” cotton seeds or their fake cousins. On the other hand, the developed world is reinventing the concept of Organic farming for its real or perceived health benefits and long-term health-cost savings. If India decides to take the GMO route, it needs to develop and build the necessary scientific and industrial base. If India decides to take the Organic route, then it needs to detoxify its farming community, which is chronically addicted to chemical fertilizers and pesticides. Given the fact that the farming sector also includes aqua-culture (fish, prawn farming) and animal farms, India needs to alter its land usage for different types of crops (fish/cattle feed vs grains/vegetables etc.). Each choice impacts the Indian farming sector in a fundamental way and needs lot of work to reach the final goal. While complex, this aspect of the farming sector can open up new topline opportunities in terms of long-term health and ecological benefits to India.

Price Support, Food Storage and WTO

Another key aspect of the Indian farming sector is the pricing mechanism. There is no scientific analysis of the total economic cost of each crop and what the price of the produce should be. Oftentimes, the price of farm produce is determined by logistical and political inefficiencies, rather than the cost to produce. For example, after setting consumer preferences aside, a kilo of beef costs a fraction of its calorific equivalent of vegetable food grains because there is no cost-accounting of the materials required to produce a kilogram of beef compared to other food products. Oftentimes, the farmer doesn’t even get a fraction of the consumer price for his produce, just because the farmer doesn’t have awareness of or the necessary logistical access to the demand side.

The Objective

I urge the readers to not fall into pessimism after reading the above data. The larger the problem, the bigger the opportunity. I believe that current state of India’s farming sector is a boon to India’s national interests because it has the potential to majorly contribute towards a multi-faceted socio-scientific revolution that India desperately needs to get out of the quicksands of triple colonization the nation went thru in the past 1400 years. Only a mind that is firmly rooted in local flora-fauna that can think out of the western-box can propel a well-rounded development of India in next coming decades.

This is where the national vision comes into picture. Modi government correctly identified that Indian Agricultural sector can be and must be turned into a national asset from a drain on national resources and reservoir of national poverty.

The stated goal of Modi government is to increase the share of agricultural sector in national GDP to 33%. Given the exponential growth India is poised to experience in next couple of decades (a 7% annual growth projects India’s GDP in 2040 will be 5 times that of today), this means two separate goals to the farming sector.

1. Increase share of farm sector in national GDP from current 18% to 33%. That translates into a farming sector GDP of $660B instead of current $360B in 2015 terms.
2. Maintain share of farm sector in national GDP at 33%. This means the farm sector GDP continues to grow at the rate of rest of economy.

Once achieved, these two goals will allow at least 33% of labor force to continue agriculture sector while maintaining comparable per-capita incomes with those in industrial and service sectors. At one go this vision reduces the burden of labor force transition by a whopping 100 million, reducing the timeline of labor excess capacity transition by 10 years (from 25 yrs. to 15 yrs.). The savings achieved in the process (~ $1.5 trillion) can be diverted to transform Indian farming sector to build a renewable national economy.

The Roadmap

Given various dimensions of agriculture sector and the stated goals of Modi government for this sector, we can identify following opportunities for the nation as a whole.

Unified Agriculture Sector definition, vision and policy

An opportunity opens up for the nation to integrate all forms of agriculture into one sector and identify synergies between various sections of agriculture. For example the definition of a farm can include, but not limited to, a solar farm that doubles as cattle-shed, a cattle-farm that doubles as captive organic-fertilizer factory, a farm that contains a mix of commercial timber, bio-diesel plantation, food-grain field and vegetable-farm and so on; the possibilities are endless. Such a definition would facilitate long-term large capital induction into farming sector that is not available today, because diverse product base in the farm will reduce overall risk profile of farm loans.

Farm Ownership and Land Acquisition Bill

For Indian society, land ownership is not just a financial aspect but a socio-cultural aspect. There are historical reasons emanating from India’s prolonged fight with colonial ideologies and the entities behind them. The spiritual and emotional attachment that Indians have to land is similar to their emotional attachment to gold; land is Sri Bhudevi and gold is Sri Lakshmi – both consorts of Sri Mahavishnu. Any person or policy that is perceived to be cutting this emotional bond will therefore be seen as an agent of yet another colonial player.

In its current form, the Land Acquisition Bill offers a onetime non-reversible financial transaction to acquire land from current owners. A better approach can be to provide more flexible options to the landowner, such as (but not limited to)

• Land will be acquired permanently for roads and other public infrastructures, but 99-year land lease agreement will be made for the industrial sector. This will address the concern that land is being transferred to corporate owners.

• Equal amount of land swapping within a meaningful distance (say 10KM) for farmers who are not interested in losing their agricultural land holdings.

• Flexibility for the landowner to choose between a one-time cash transaction or a mix of at-face-value shares in the SEZ/Industry. This can also include the economic benefits from public infrastructure.

The Land Acquisition Bill will have more approval and support from landowners if its focus changed from changing land ownership to facilitating the transition of landowner from one economic sector to another sector, along with their land holding. The bill would create new opportunities for the people to transition from one sector to another without losing their financial, and most importantly, emotional, attachment to their land holdings.

Reorganizing the Agriculture Sector Labor Force

The agricultural sector labor force is not a single monolith, and consists of many groups, often with conflicting interests. Remember that 99-million out of 121-million agricultural land holdings are small and marginal farmers, with an average land holding size of 1.37 hectares. There are also millions of farmers who don’t own land, but rent or lease land for farming, in addition to many more millions of daily laborers. The farming sector employs people as young as 12 years all the way to octogenarians.

There is a great need and opportunity in developing a national registry of all of our agricultural labor force and performing a detailed analysis based on their demographics, region, skills and economic status. An accurate understanding of the labor force is necessary for effective land reforms, skill development, and re-employment in non-farming sectors.

Various government schemes and policies can be utilized to reorganize the farm sector labor force in the most effective manner. Some ideas that can be used in this process are:

• Bring farm labor above a certain age group into a newly unveiled Social Security scheme in such a way that they live above the poverty line.

• Identify suitable non-landowning labor for skill development and reemployment using MNREGA-like schemes. 

• Turn agricultural subsidies into long-term loan contracts, so that the farming sector can get the necessary capital resources to transform itself into a renewable economy. A recent economic survey ^[3] puts the amount of agricultural subsidies (not including Railways, fuel, electricity and water subsidies) at more than Rs 235,000 Crore per year.  This works out to be an annual subsidy of Rs 23,500 for those 100 million small and marginal farmers. There is a lot of room for opportunity in utilizing these subsidies better.

Ecological Security for Food Security

Nature, by definition, is the manifestation of the optimized ecological balance of a given region. By extension of that definition, India’s ecosystem is the most optimal balance of India’s regional conditions. India’s long-term survivability and success therefore comes from developing on this natural balance, rather than from disturbing it. Indian crops, fisheries, cattle etc. evolved, by natural selection over millennia, to survive and sustain in local conditions in the most efficient way. The human aspect of our great civilization can thus prosper by designing its own vision within this ecosystem; not, outside of it.

Studies tell us that for all of humanity to live at the current USA/European levels of consumption, we would require more than five Earths. Reaching China’s current level of consumption would require one and half Earths. Any logical mind will realize the futility of India trying to tread this path. However, that doesn’t mean that Indians cannot achieve the quality of life enjoyed by other advanced economies. India just needs to prioritize improving its human development indices while having the minimum possible impact on its ecosystem. This task is not difficult if the national agenda and policy is built around a renewable economic model from the get go.

Agriculture Sector as a Renewable Economy

With proper vision, groundwork, and sound national policies, India’s agricultural sector can give the necessary impetus to leapfrog the Indian economy from an agrarian-economy to a renewable-economy, bypassing the industrial and service phases. A renewable economy is where 100% of human socio, economic, and technological prosperity comes from renewable sources and processes. The advanced economies are already moving in this direction because the age of human and industrial colonization is ending, and each civilization has to live within its own natural means.

Agricultural, industrial, and economic scientists must bring their minds together to identify various models to achieve target per-capita incomes at small farm levels (~5 Acres) using a mix of complementing energy, commercial-timber, animal-husbandry, fisheries, food grains and medicinal herbs farming models and technologies. Governments must change policies and laws to recognize the farming sector as a small & medium business, and encourage necessary innovation in this field.

Conclusion

India’s agricultural sector is a complex multi-dimensional socio-economic-political problem with far reaching consequences to its national security. India, as a civilization, has not just a material, but also emotional and spiritual connection with their land holding. The problems manifesting in India’s agricultural sector are also a reflection of problems in other sectors. A proper understanding of the national vision, overall civilizational needs, and India’s objectives is required to realize the underlying opportunities and possible solution strategies.

An effective strategy and efficient execution of India’s national vision is necessary to achieving a purposeful transition of labor force excess capacity from the farming sector to other sectors. 

The Modi government, as articulated in different forums, has set the right national vision as far as the agricultural sector is concerned. Different policy decisions made by this government emanate from that vision to elevate farm-sector as an equal partner in the national economy. Schemes like JDY, Universal Social Security, and farmer pension schemes are nothing but a few relevant parts of this national vision.

All the noise from the political opposition is just tactical maneuvering for their political survivability. There is no alternative vision proposed by the opposition groups, except for demands for the continuation of failed policies and corrupt practices.

The Modi government has many other forums to explain, educate, train, and help the agricultural sector in its transformation into an equal pillar of the national economy, along with the industrial and service sectors. As its vision comes into execution, the beneficiaries would be the millions of people making up the agricultural sector, as well as the nation as a whole.

Sources:

[1] Small Farmers in India: Challenges and Opportunities

[2] Alternative Budget Scenarios for India

[3] India Economic Survey - Wiping every tear from every eye