May , 2018
What ails Indian agriculture
14:41 pm

Ratan Khashnobish

About 50% of the main workers in India still earn their livelihood from agriculture. Although the sectorial contribution of agriculture has now come down to about 17% of our GDP, one cannot ignore the problems of agriculture because half of the working population in India still remains engaged in this sector. The grim reality, however, is that  agriculture is not found to be remunerative for a large section of the households considered agricultural households in India. In the latest round of the NSSO (National Sample Survey Organisation) survey, out of every 1000 agricultural households, 505 households in Bihar reported that they were not liking farming as the main source of their livelihood. 352 out of those 1000 households pointed out that they want to opt out of agriculture  because it is not remunerative anymore. In West Bengal, out of 1000 agricultural households, 455 reported that they were not liking farming, the comparable figure for Uttaranchal was 532. In Karnataka, 433 per 1000 agricultural households reported in the same survey that they were not liking farming anymore. The all-India scenario in short is that more than 40% of the agricultural households as per NSSO survey are willing to opt out of agriculture. They remain engaged in agricultural sector simply because they do not find any other source of livelihood. One should discuss the problems of agriculture against this backdrop.

According to the agricultural census 2010-11, the farmers with less than one hectare of land as their individual operational holding constitute 67.1% of total agricultural households in India. They are defined as marginal farmers. Small farmers (size class of operational holding at 1-2 hectares) constitute 17.91% of all agricultural households in India. Indian agriculture is fast turning into a sector dominated by marginal and small farmers with low bargaining power in the market. One should take this factor into consideration while trying to mitigate the problem of Indian agriculture, vast majority of the farming households in India cannot absorb the shocks of a market economy unless there exists a buffer to absorb the shock. Herein lies the crux of the issue. It was expected that the state would provide the necessary buffer to the farmer households in a situation where the economy was getting reformed and the market mitigated solutions were being suggested for solving the problem of Indian agriculture.

In the pre-liberalised era, the Indian state was oriented towards functioning as shock absorber; the government had to take the responsibility of ensuring inputs for new agriculture (green revolution warranted) at given prices and it was only expected that agriculture would target the problem of ‘food security’ which inter alia implies increasing agricultural production at a remunerative price for the farming community. The supply side constraints would be taken care of by offering remunerative prices in form of minimum support price (MSP). The issue of supplying food at a stable price would be taken care of not by the market but by an elaborate chain of public distribution system. Obviously, such a solution is inefficient in the sense that it needs the government to provide ‘subsidy’ to agriculture both by maintaining the input prices at a lower level and at the same time subsidising the output prices in the form of MSP.

The votaries of neo-liberalism would never buy this logic. In the neoliberal era when the government policy tilted in favour of neoliberal strategy, systematic withdrawal of the state did take place in providing fertiliser subsidy, subsidy in the form of low cost electricity, etc. towards agriculture. The public distribution system was subverted and ultimately the concept of statutory ration was undermined. Indian peasants had to face the reality of free market economy which they faced with poor bargaining power without having any clue to negotiate the reality of asymmetric information that favour the traders in both the input and output market. The scenario that we face now is full of paradoxical outcomes. We do not have now any problem of ‘production’, the Indian economy can now mobilise more than 215 million tonnes of cereals in a normal year from the internal market. At the same time, in India, 40% of the agricultural households do not like to stick to agriculture as the source of livelihood. Food gain prices do face volatility in the market and the market of the inputs in agriculture remains monopolistic. A sticky price comfortably revised upwards in a systematic manner is the grim reality there and the peasants do not have any buffer to absorb the shock. MSP, of course, is there. For political reasons the government cannot do away with the provision of MSP but nobody till date has taken it as seriously as Professor Swaminathan wanted the government to do.

One should point out that agriculture needs subsidy and even the developed countries did not find it prudent to follow the advice of neoliberal strategists so as to find an ‘efficient’ solution for agriculture by allowing the market forces to play its role, as it is supposed to play in other markets of those economies. Why is it so? The reason is not difficult to find. A market mitigated solution for agriculture where subsidy has no role to play is expected to lead to a situation where the non-agricultural sector would suffer from wage-goods constraints, as pointed out by Michale Kalecki. The general rate of profit (in macro sense) would decline and the economy would slow down. One should not therefore look for a non-subsidy based ‘efficient solution’ for the agricultural sector. This would jeopardise economic growth. In India one should take these points seriously and the very premise that a neoliberal market mitigated agriculture should be questioned. Agriculture needs subsidy. A subsidy based agriculture would pave the way for a stable and growth oriented economy. The farmers would find agriculture as remunerative. The tax payers would find it prudent to pay the subsidy to agriculture, as the taxpayers of the European Union, United Kingdom or the USA find it even in the neo-liberal era.

— The writer is the Advisor to Vice Chancellor,

& Dean School of Economics and Commerce, Adamas University, West Bengal 

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