Last week, we spoke of the elephant in the room ? the one thing everybody studiously avoids noticing. Namely, that hundreds of millions of Indians remain stuck in villages working the same fixed resource ? the land ? that they have inherited. But while India?s landmass is fated to remain constant, the number of people dependent on it has risen three-fold since Independence. The gains of technology ? irrigation, hybrid seeds and fertiliser ? has been mostly consumed by the expansion of the people dependent on agriculture and animal husbandry. In real terms over five decades, per capita incomes in rural India has failed to double, while that in urban India has risen almost five-fold.
The capacity of agriculture to generate higher incomes is limited not only by the productivity of the bountiful earth, but also by the fact that people?s consumption of food does not rise in proportion with their incomes. When societies are very poor and most people are under-nourished, then for some time, as incomes rise, so does the demand for more and higher quality food. Agri-culture and animal husbandry can just about keep pace with the rest of the economy. But that phase soon ends, and the incremental share of food consumption drops off rapidly for every increment to income.
In most societies, everyone is non-vegetarian, as a result of which meat deprivation is an important aspect of being poor. Therefore, as people?s incomes rise, they eat more meat ? from once in a while, to once a week, to every day and ultimately, at every meal till the lifestyle diseases catches up. In India, many people are vegetarian and the proportion amongst the better off are much higher than for the population as whole. That serves to limit the demand for agricultural produce to an even larger extent.
Raising beef and other red meats consumes much more energy than for white meat and the least for foodgrain and vegetables. While ecologists might consider vegetarianism as a good thing, its implications seriously limit domestic demand for grain and other foods. This year, India will produce some 215 million tonnes of foodgrain and is sure to find a large part of that piling up in the Food Corporation and perhaps exported. China, with a population just a fifth larger than us, produces nearly 500 m of grain, but the difference in their dietary preferences permit the much higher consumption level. Since it is entirely unlikely that public policy will be geared to make this a country of beef and pork eaters, it is best that the policymakers recognise the limits to which agricultural output will find a market in India.
The next step is to recognise that the greatest resource any economy has is its citizens and the fact that Indian agriculture not only supports too many people, it engages too many. The underemployment of the hundreds of millions of India?s people in agriculture is our greatest misallocation of resources. In the accompanying chart we have plotted the progress of gross domestic product (GDP) for India and China since 1978. To make the comparison easier, the respective GDP are expressed as indices with the values for both countries in 1978 set at 100, which is measured on the left-hand scale. On the right-hand scale is the proportion of the population residing in urban areas and is represented by the three sets of columns for 1981, 1991 and 2001.
Two things become quite obvious. One is the power of compounding ? as the differential growth rate in the two economies pushed them rapidly apart over the course of the past 25 years. The second is the remarkable difference in the urbanisation experience ? the flip side of migration of under-employed people from rural to urban locations and from being employed and dependant on agriculture to being employed in industry and services.
At the time that China embarked on its capitalist enterprise in 1978, breaking with its socialist past, India actually had a higher proportion of her people living in urban areas than had China. In the early ?90s, urbanisation in China had crept ahead of India?s and by the beginning of the new millennium, the contrast is as sharp as is the distance that the GDP of the two economies had moved away from each other.
Surely, there is an enormous lesson to be learnt and much ground to cover. The humbug of the past has to be set to aside if India is to have a future that shines.