If India’s farm productivity is raised to even Chinese levels, it can free up 33% more land for industry
Those opposed to the land acquisition Bill will undoubtedly use the unseasonal rains, and the possibility of a deficient monsoon, as yet another opportunity to tell farmers they are being short-changed by the government. The farmer is not even able to make ends meet, you can picture Rahul Gandhi saying, and the government is trying to deny him even that right. The latest to join this battle is Christophe Jaffrelot who has argued, in his “The Promised Land”, The Indian Express, goo.gl/0GT6WX, that the land Bill comes at a time when there is a shrinking of agricultural land anyway—2.76 milllon hectares, to quote his figures, has been lost between 1988-89 and 2008-09, and then an additional 4 lakh hectares between 2007-08 and 2010-11 to urbanisation and industrialisation. In per capita terms, he adds, availability of agricultural land has fallen from 0.34 hectares in 1950-51 to 0.12 hectares in 2010-11.
Put that way, it sounds quite frightening. Indeed Jaffrelot indirectly links this to India importing 80,000 tonnes of wheat—he says this is because of the unexpected rains ‘but this kind of accident could become more frequent because of climate change’. In other words, as he asks, ‘India needs to industrialise, but can it do so at the expense of its food security?’
It is, of course, true that prime minister Narendra Modi has probably got it wrong on the land Bill since it has united a moribund Opposition—and given that land is a state subject, or at best a concurrent one, he should have left this to the states to legislate (goo.gl/Hrj0nD and goo.gl/S2uFl2). But the kind of fear mongering being done has to stop.
The 80,000 tonnes of wheat imports has little to do with crop shortage, it has to do with pricing since it is cheaper to import wheat in coastal areas than pay FCI what it is charging—the hows and whys are a longer story, but suffice it to say that India has 34 million tonnes of wheat stock at the moment, around 10 million of which is surplus (since around 2 million tonnes is sold each month through ration shops).
Obviously, per capita availability of land has to fall, and it has all over the world, since land is not being manufactured anymore save for some reclamation of land from the sea. And if per capita availability of land was the only thing that mattered, India would have had roughly a third of the production of crops that it had in 1950-51—yet, production of paddy and wheat has risen 5 and 15 times, respectively, and pulses 2 times.
What matters is productivity. As the graphics show, India’s farm productivity is a fraction of those in comparable countries like China. In the case of paddy, India has roughly a third more land than China has but produces around a fourth less—so, if India had China’s productivity, it could theoretically afford to free up 12 million hectares of paddy fields for industry, services and creating new cities/infrastructure; if it had China’s productivity in wheat, another 5.6 million hectares of wheat land could theoretically have been freed up without any loss in food security. Professor Jaffrelot, to put his land diversion in context, is only talking of 2.8 million hectares. So let’s get some perspective on the debate, please. If, at an overall level, India’s productivity levels rise 50%, it can free up a third of the land—Chinese productivity is 82% more in the case of paddy, 57% more in the case of wheat and and 130% more in the case of maize.
But, the instant reply will be, India doesn’t have Chinese-style productivity, so why are we even talking of it? When India reaches Chinese productivity levels, we will free up the farm land then. That sounds a fair point, and this is Modi’s big challenge. To get to Chinese productivity levels, India needs more irrigation facilities and the farmer needs to invest more in fertilisers and other nutrients—the problem is of lack of money to invest in irrigation, not the fact that, as Prof Jaffrelot says, water tables are getting lower in states like Punjab and Haryana.
If the government was to disband the physical ration stock system and cut FCI’s buffers by even 20 million tonnes—by the way, a July 1 stock of 60 million tonnes with FCI is in any case 18 million tonnes more than the recommended buffer of 42 million—it would get R45,000 crore for this. Imagine what can be done with that money if it was used to create irrigation facilities in places like Bihar and West Bengal that have very high water tables.
It gets better, or worse, depending upon your point of view. Indian states give a power subsidy of around Rs 70,000 crore each year to SEBs to provide cheap electricity for farmers. Add the fertiliser and water subsidies and we are talking of around R200,0000 crore each year. Divide this by the net sown area of 140 million hectares and we are talking of the government being able to give farmers R14,000 per year per hectare in cash. Imagine what that would do for farmers in states where there is poor productivity right now—in any case, most of the subsidies go to the better-off farmers right now. Oh yes, that additional productivity will raise the amount of crops grown and probably free up a few more million hectares of land!
It is probably true that were Modi and/or the state governments to start removing power and fertiliser subsidies and give them directly into the Aadhaar-linked bank accounts of farmers, they would be called ‘suit-boot ki sarkar’. The actual fact, as the Modi government’s own Economic Survey reiterates, is that most subsidies do not go to the poor—indeed, the governments that don’t reform subsidies, like the UPA, are the real ‘suit-boot ki sarkars’.
Postscript: Many argue, including the latest Crisil report, that the government has a very tight fiscal constraint, so it can’t spend money in areas like irrigation, for instance. This is simply not true. This column has just talked of how R45,000 crore can be got by just sticking to the buffer norm; this can go up to R1.25 lakh crore by adopting the buffer norm of the Shanta Kumar committee. The shares of SUUTI and HZL/Balco are worth R59,000 crore while the budget is looking at just getting a fraction of this. Reducing government stake in all PSUs other than banks to 51% will fetch around R2.7 lakh crore—the budget’s total divestment target, including strategic sales, is R69,500 crore. And we are not even talking of monetising the value of land held by government since there is no central record of this. It is not money, but determination that is holding back large government investments—both Suresh Prabhu and Nitin Gadkari have staked their reputation on this.