Sep 15, 2013

Pushing farmers out of agriculture is not economic growth.


A few days after the release of the latest census data I happened to be participating in a TV discussion on the continuing distress in agriculture. After all, with nearly 2,500 farmers quitting agriculture every day, and with the number of cultivators owning land declining to less than the number of landless farm labourers for the first time, the question that was asked to me was whether this was good news or bad.

“It certainly is bad news for the country,” I replied, adding: “But it must have come as a great disappointment to India’s planners and policy makers. They were anticipating a bigger shift in population from the rural to urban areas, and it shows that all their efforts to force the farmers to abandon agriculture have not worked so well. They have not been able to meet the economic prescription that the World Bank had prescribed.” Needless to say, the economist on the panel wouldn’t agree.

At a conference organised by M S Swaminathan Research Foundation, in Chennai, way back in 1996, I vividly recall a presentation made by the then Chairman of the Consultative Group on International Agricultural Research (CGIAR) and also a vice chairman of the World Bank, Dr Ismail Serageldin. He said as per World Bank’s estimates the number of people migrating from the rural to urban areas in India in another 20 years – by 2015 – would be equal to twice the combined population of UK, France and Germany. The combined population of these three European countries is around 200 million. So the World Bank had anticipated 400 million people, more than the population of United States, moving out of rural areas in India in the next 20 years.

I thought this was a warning. Perhaps the World Bank was telling us to be doubly careful and initiate appropriate policy approaches to restrict the population shift, which is laced with disastrous socio-economic as well as political ramifications.  No, I wasn’t correct. The World Bank was actually spelling out an economic prescription. This becomes apparent when you read the subsequent World Development Reports, annual publications of the World Bank. Reading the 2008 World Development Report, I was shocked to find the bank actually asking India to speed up the population transfer by encouraging land rental markets. 

At the same time, the bank made it abundantly clear that the younger people in rural areas do not know anything but farming. Displacing them from agriculture without teaching them the skills to become industrial workers will only add to the rural workforce. It therefore suggested setting up a network of training centres where these youngsters could be trained to become industrial workers. And no wonder, in the 2009 Budget speech, just before the elections, the then Finance Minister made a budgetary provision for setting up 1,000 industrial training institutes.

I wasn’t therefore surprised when Dr Raghuram Rajan, the new governor of the Reserve Bank of India (RBI), parroted the same economic prescription. In an interview with the New York Times, this is what Rajan had to say:  “In terms of where will growth come from, it doesn’t need to come from fancy stuff like extraordinary innovation of one kind or another. Just getting people from agriculture into services and industry itself is growth.” He has repeated the same solution to the economic woes in a Walk the Talk he had with Shekhar Gupta sometimes ago. And as I said earlier, Rajan too is disappointed. In another interview, he admitted that the exit of people from agriculture has not kept pace with economic growth.

Soon after assuming office, when Rajan said he is not looking for the number of ‘likes’ on the facebook but is contemplating some tough decisions, my impression was actually he wanted to convey was that he will opt for ‘tough love’ – tough for the aam aadmi, and love for the rich -- because this is exactly what the market economy textbooks prescribe. Allow for unbridled privatisation of profits, and when the bubble bursts socialise the costs. It’s the poor who must make sacrifices to keep the wheels of economy churning. This is exactly what happened at the time of the 2008-09 economic melt-down. This is what subsequently led to the Eurozone crisis, and this is what has been at the back of India’s economic downturn.  

Moving people out of agriculture may be the ultimate goal, but there are some ways to prop up the economy in a short-term. Sometimes back, senior journalist and author M J Akbar had in one of his columns given us an excellent idea. He quoted a Russian Finance Minister, who in wake of declining GDP in Russia, actually asked fellow Russians that the least they can do to help the economy grow is to start drinking more vodka. The Economist too has among other things suggested opening up of casinos to ensure that people with surplus money do not flock to Sri Lanka on weekends. As if this is not enough, the Thai have proposed setting up of massage parlours under the Indo-Thai free trade agreement that is being renegotiated. Massage parlours are of course a service industry.

If these are the options available to raise the sagging economy, there is something terribly wrong with the way we perceive economic growth.  But let us first look at the flawed thinking that is aimed at destroying domestic agriculture. The neglect of agriculture is deliberate and part of a bigger design. In a country where roughly 70 per cent of the population lives in the countryside, there can be nothing more disastrous than to plan for a massive population shift in the coming decades. Just because the World Bank/IMF and the American universities have been flouting the crazy hypothesis, does not mean that we should follow it blindly. What India needs therefore are leaders with vision and wisdom and not ideological free market brats who cannot see beyond the G-20 mandate. 

Agriculture provides livelihoods for nearly 600 million people. They are certainly underemployed, and undernourished. The challenge therefore is to make them gainfully employed, and not to uproot them and turn them into agricultural refugees. Like the young graduate from a business school, a farmer is also an entrepreneur. He needs improved skills for which he needs training, and also needs a launching pad. Take the case of a poorest of poor women in a village. When she goes out to buy a goat, she needs microfinance. She eventually ends up paying 24 per cent interest to MFIs, which at weekly repayment plan turns to be 38 per cent. With such a predatory interest, she will perpetually remain in the poverty trap.

If steel tycoon Laxmi Mittal can be advanced Rs 1,250-crore at zero interest for investment in Bathinda refinery, or if Ratan Tata can be provided land at a throwaway price and financial credit at 0.5 per cent rate of interest, I wonder why the poor are penalised. Provide the poor women credit at zero percent, and I bet she would be driving a Nano car at the end of the year. Give the farmer a decent monthly assured income, and make appropriate investments in rural infrastructure, and I can tell you he will not only put the country’s economic growth on a much higher pedestal, but ensure that the gains of economic development are distributed widely and equitably.

India therefore provides a unique opportunity for neoliberal breed of economists like Raghuram Rajan to de-learn and un-graduate. As someone said, that’s the only way we will learn to challenge all that we have accepted as time-tested truths. Move away from the growth fetish, remove the IMF/World Bank cap, and start looking afresh at economics as if people mattered. If a non-descript village like Hiware Bazaar in Maharashtra can boast of 60 millionaires, and that too without any forcible land acquisitions under public-private partnership or sucking the state exchequer dry with tax sops and tax holidays, each of the nearly 6.4 lakh villages that dot the country can do the same.

What India needs is a production system by the masses, and not for the masses. That’s what Mahatma Gandhi said. And he wasn’t wrong. #   

Source: Tehelka, Vol 10 Issue 38, Sept 21, 2013.

4 comments:

Anonymous said...

I agree to you when you say that why can't we have model of growth different from west where urbanization seemed necessary for growth but at the same time I am worried have we done enough research and reasoning at our own level at least if such model really exists and viable if they do.

Harshada Koli said...

very nice blog as it say how much agriculture is important for the development of our economy. barbed wire

Harshada Koli said...

Nice blog as it state how agriculture is important for the development of our economy
barbed wire

Anonymous said...

You are very right in suggesting India to have an alternative growth perspective,, but when you say, "
Moving people out of agriculture may be the 'ultimate goal', but there are some ways to prop up the economy in a short-term", didn't you revert back to mainline Western prescription,,, please explain.