India’s persistent poverty can be, in one way, analysed as follows: (1) Very high density of population; (2) a sizeable section of its population being dependent on land; (3) much of their income comes from land’s inherent productivity rather than out of any specialised skills; and (4) poor economic output of land per se, and rigidities in shift of land-use pattern.
Amongst its peers in BRICS, India is most crowded. Even within ASEAN—the new reference of cost-competitiveness—India has the highest density of population (see graphic). With the exception of Bangladesh, which has taken away much of textile trade, India’s land availability imposes a serious handicap on its economic ability to pull people out of poverty on a sustained basis.
It is, therefore, imperative that India uses all its scarce land in the most productive way. Unfortunately, reforms in land-use patterns have become a sensitive issue, both due to poor occupational mobility of those currently dependent on land (due to skill deficit) and the moral brigade who wields undue power and ties tight knots around governments without any corresponding responsibility to suggest workable alternatives.
The accompanying graphic exhibits yield per hectare in 2015 from various agriculture and allied activities in Andhra Pradesh, one of the more progressive states. It is to be granted that the current systems of economic measurements (such as GDP) do not properly capture the existential value of forests and other such ecosystems. The annual economic value added (EVA) of the forest areas is just about Rs 8,500 per annum per hectare, i.e. Rs 2,100 per person per annum considering India’s average density of population.
What can anyone achieve with this kind of income and when will the tribals and land-dependent poor be pulled out of poverty? The EVA of our forests has to multiply significantly. The approach may have to be different for evergreen forests and the degraded forests.
So far, the approach of the do-gooders and evangelists of the poor and tribal people has not been participative but protectionist from outside intervention. If their approach and the response of the government continues to be like as earlier, drastic reduction in poverty may remain only a dream. The methods to increase the value addition will have to be calibrated according to the lay of the land.
In densely-forested areas, we need to retrain people in alternative skills. Perhaps the rest of the society should transfer income to the residents to preserve such forests for their rain-bearing capacity, climate control, flora, fauna and rare plant species, towards non-marketed but essential ecological positive externalities like carbon sinks, biodiversity, etc.
The government should move other economic activities like eco-tourism, poverty tourism, cottage industries like handloom, carpet weaving, beedi rolling, etc, into such areas. Given their low geographic mobility, transfer of economic activities after skilling them is essential even if it involves private enterprises.
There are low-grade forests whose biological accretion per annum and economic output are both poor. These should be about 40% of our ‘forests’. Instead of preserving such forests on ‘as is where is forever,’ they should be made regenerative by allowing commercial plantation. Vietnam has demonstrated a model where the government owns much of the land and encourages plantation where the revenues are shared. Brazil has demonstrated how corporate farming can work.
India itself has a fine-tuned but low-scale micro farm forestry. These forests can produce timber, pulpwood, wood for energy, wood for construction supplies and can push up the low EVAs in these lands to about Rs 40,000-80,000 per annum—5-10 times the current levels.
Of course, cut-off standards of ecological values, biological value-adds and economic value-adds should be established. If any patch of land or forests fails to achieve these, it should be opened up for regenerative forestry. The government and private enterprises can seek optimal economic cropping pattern.
The success in increase in EVA in these areas would require (1) shift in land-use patterns; (2) the government staying away from minimum price interventions—only prices determined by markets can optimise use; and (3) less, or absence of, government control. Where the government owns the land, it can be on a revenue-share model without ownership transfer, like in Vietnam, which could create significant employment. Given the share of our degraded forests, it should not be difficult to create and maintain 5-6 million jobs, assuming one job for every five hectares.
The shift in land-use pattern is a fundamental necessity for any developing economy trying to emerge out of primary sectors. It would be possible to achieve significant improvements in EVAs even with the current limits on landholding for agricultural purposes at 50 acres per person/entity. The draft Forest Policy of the ministry of environment and forests makes the right kind of noises at the policy level. One only hopes it will cut through the maze of NGOs, panchayats, state governments and the bureaucracy.
By V Kumaraswamy
The author is CFO of JK Paper and author of ‘Making Growth Happen in India’