The Union government?s announcement of the Rs 17,000 crore rehabilitation package for farmers in the 31 suicide-prone districts of AP, Karnataka, Kerala and Maharashtra focuses attention on the plight of the farm sector in a fast-growing economy.
While the emphasis on irrigation, interest waiver, watershed development, seed replacement and dairy industry is welcome, the deeper causes of agrarian crisis call for critical examination. Three fundamental long-term trends have led to the prolonged crisis. First, agricultural commodity prices have been declining worldwide, and in India, for decades. The recent growth spurt in the global economy witnessed a steep rise in the prices of industrial raw materials. But food prices are stagnant, as greater prosperity does not increase food consumption beyond a point, and higher production actually depresses prices. Second, the restrictive trade and pricing policies for agricultural commodities seriously damaged the farm sector for decades until the ?90s, and weakened farmers? capacity to withstand shocks. Belated efforts to restore balance in the terms of trade coincided with an accelerated shift to services, leading to neglect and decline of agriculture. Third, the share of agriculture in the gross capital formation (GCF) fell from 15.4% in 1980-81 to 8% in 2001-02. And as a percentage of GDP, GCF in agriculture fell from 3.5% to 1.6% during this period.
The crisis has been aggravated by distorted government priorities and irrational policies. Three examples will suffice. Free power or un-metered power at fixed slab rates promoted excessive investment and over-exploitation of ground water, failed tube wells, indebtedness and impoverishment. Stultifying state control and corruption and cronyism in cooperatives undermined a potentially vibrant support system, denying farmers credit, quality inputs, market access, processing facilities, technology and management. Unaccountable control of markets in most states denied them market intelligence and bargaining power, and made them vulnerable to mo-neylenders and mafias.
This misery has been compounded by the criminal neglect and failure of the state in education and healthcare. Even poor farmers and labourers are forced to spend huge sums out-of-pocket for indifferent private schooling and hospital costs. A high proportion of rural families incur huge debts at usurious interest rates to meet hospital costs.
Even a casual glance at the comparative trends of GDP growth in farm and non-farm sectors indicates the gravity of the crisis. About 55% of the population dependent on agriculture shares only 20% of our GDP. In effect, its per capita income is only one-fifth of per capita incomes of those dependent on industry and services. With agriculture growing at 2% annually and the rest of the economy at over 9%, the share of agriculture is failing each year by almost 1% of GDP. If the current trends continue, agriculture?s share of GDP will decline to about 14% by 2014. Even maintenance of the current per capita income differential between other sectors and agriculture would need a shift of about 11% of the population from farm to non-farm jobs, reversing the current ratio of 55:45. Given the slow rise in job opportunities in the non-farm sector, such a huge occupa-tional shift seems impossible.
Clearly, the majority of the population has no place in the growth bandwagon, making rapid growth unsustainable, and society and polity unstable. The crisis needs a robust response from the state. We do need to invest heavily in agriculture, harness each drop of water, and enhance productivity through better inputs and extension. But, much more needs to be done.
To protect farmers from cheap imports, such as cotton, tariffs need to be raised. Pricing policies for agri-commodities need correction |
First, wherever farmers need protection from cheap imports, tariffs need to be raised. Cotton is a good example. Foreign governments are heavily subsidising their cotton farmers, and Indian farmers are unable to compete because of low import duty. It is no accident that a large proportion of suicides are in the cotton belt. Second, national policies must be pursued in respect of groundwater, cooperatives and markets. Judicious price incentives will remove distortions in groundwater use, and democratisation, member-control and competition will liberate the cooperatives and agricultural markets from the clutches of corrupt politicians and bureaucrats and unscrupulous moneylenders and mafias.
Third, the focus should be on value addition, particularly in case of perishable crops. Extreme price fluctuations and distress sales can easily be prevented by creating a network of processing industries, guaranteeing fair price to both farmers and consumers. Fourth, a massive programme should be launched to promote high value crops like medicinal plants, and bio fuels. India is well placed to take advantage of the next agricultural revolution in the offing, as both food and fuel will compete for the same land with the end of the era of cheap oil.
Fifth, special attention needs to be paid to artisans, occupational groups, animal husbandry, poultry and fishery sectors. Agricultural crisis acutely affects artisans and occupational groups, and skills, credit, market linkages and a measure of social security for them are critical. Sixth, we need to develop urban amenities in rural areas and promote non-farm activities and the services sector.
Finally, the state must focus on its core functions and assure good quality, free education and healthcare for all citizens. Much of the rural distress is the outcome of the state?s failure in basic services. We can?t sustain high growth, nor can we alleviate rural distress, without transforming our politics and governance.
?The writer is the coordinator of VoteIndia?a national campaign for political reforms
