An agenda for Indian Agriculture and Economy
by Krishnarjun on 21 Feb 2014 2 Comments
Thousands of years of Indian agriculture is now facing its biggest crisis. The country where goddess Annapurna is worshipped has been witnessing suicides by farmers in droves for the last two decades. Under British rule, mass famines were caused by design, causing millions of starvation deaths, but even in that era farmers alone were not forced to commit suicide under the burden of debt and poverty. What then is the genesis of the current farm crisis that is specifically impacting only the farmer? While the country has no apparent shortage of food, what is forcing the food grower to commit suicide?


The crisis in Indian agriculture is less about farm or farmer and more about a pattern of economic thinking that has institutionalized discrimination towards agriculture. This kind of thinking has its origins in a culture obsessed with homo-centrism and human consumption. This culture refuses to acknowledge that human existence is inextricably linked with survival of other creatures that share the planet. This modern cultural insensitivity has fashioned a worldview that considers evolution and extinction of species as a random natural process resulting in survival of the fittest, and that there is nothing alarming about it. This insensitive philosophy from the western hemisphere has infected the planet and the human species in the last few centuries.


The proponents of this new reductionist thinking claim that they have improved the standards of human life, but strictly speaking, even in the material sense they have not added anything fundamentally different for material enjoyment. On the contrary, diversity in food, the basic measure of material prosperity, has decreased with the extinction of a number of species of flora and fauna, due to industrial agriculture and pollution. Advances in medical science have curbed mortality rates, but overall the public health scenario has degraded with increased health risks and new types of diseases cropping up as a consequence of pollution and sedentary lifestyles.


For better insight into this thinking and the tricks involved, some focus on macro features of modern economy is required. The Gross Domestic Product (GDP) of a country in some sense is a measure of total goods and services in an economy. It has three components corresponding to three broad categories of economic activity - services, manufacturing and agriculture. Current Indian GDP composition is agriculture 17%, manufacturing 26% and services 57%, while percentage dependence of population on these sectors is agriculture 52%, manufacturing 22% and services 27%. This means that for every Rs100 of national income Rs57 is distributed between 27% population in service sector, Rs26 goes to 22% population involved in manufacturing and only Rs17 goes to the 52% in agriculture.


The conventional approach of economists to deal with this huge imbalance between sectors is to move population from agriculture to manufacturing and services. They call this expanding the economic pie or improvement in the standard of living. This proposition looks attractive to a civilization brainwashed to think of agriculture as a substandard, unskilled, primitive and regressive sector. For the sake of argument, let’s agree with this modern wisdom and make agriculture irrelevant in GDP and economy with mechanization and negligible human resource intervention.


Now assume population is freed from the burden of agriculture and ready to be engaged in manufacturing and services. Empty minds that create devil workshops are mostly products of empty hands, people need productive engagement to look and act sane. With significant economic activity like agriculture not fit for large scale human participation except for making profits for corporations, the whole population has to fit into manufacturing or services or remain unemployed.


Economic think tanks use similar arguments in manufacturing also, and support rules that help corporations to maximize profits. Mass production lines, automation to minimize labour costs, all these ensure least possible human participation in manufacturing. Anyway, with current practices, manufacturing could support at most 25-30 per cent of the population in an economy that has reached its full consumer potential. The remaining 70 per cent has to depend on the service sector for productive opportunities. Negligible human engagement in agriculture and limited participation in manufacturing means more than 90 per cent urban population in an economy. Urban essential municipal services, retail markets, government, transportation, utilities, professional services can accommodate 20-30 per cent of the work force, depending on other factors in an economy.


For policy-makers, to provide full employment with 70 per cent in the service sector means they have to promote a social, legal, business framework that creates employment in the service sector. With huge population removed from the real productive sectors of the economy and committed to urban jobs, the insecurity in their lives has opened huge opportunities for insurance sector growth. The daily work schedules of the urban economy has replaced the family kitchen with corporate fast food chains and restaurants, the primary reason for immense wastage of food and health risks in developed economies. The tiresome, boring wage slavery to corporations drives population away from concrete jungles at every available opportunity. This creates growth in the tourism sector, with commercialized tourist destinations promising glimpses of natural environment and other recreational facilities.


The necessity for all adults to work in a family to consume forced non-essential services in an urban setup has opened opportunities for commercial care-taking opportunities for children and the aged. To ensure livelihood for the legal fraternity and their dominance in the overall scheme, lawyers who manage to climb the political ladder better than others, create a legal web that forces distrust between wife and husband, parent and offspring, doctor and patient, teacher and student, owner and renter. The financial industry has to churn out new products, new games of financial betting in markets to ensure quarterly profits for bank-corporate elites and to keep huge number of brokerages in business. A large part of service economy is about commissions between brokers of all kinds from stock, insurance, technology, legal to real estate.


Thus, to achieve maximum employment in service sector, society has to destroy the family and community orientation. All human interaction has to be commercialized to extract maximum employment. Society has to transform into a system of subservience to corporation and state, nothing else really matters. After all this, around 10 per cent population still remains unemployed, surviving on state doles like food stamps.


The transformation from agriculture to service economy is financed by debt, shifting real wealth from common people to the bank-corporate nexus. Even if we assume this wage slavery setup is modern and desirable, with inflation the average per capita wage always lags average per capita costs, pushing the majority of the population into an inevitable debt trap. To graduate into this economic setup, an average citizen has to finance his education by a big student loan at teenage, and then follow all other debts.


The promise of modern economic planners and technological innovators to improve standards of living just remains a promise; so far the system has made the average person more insecure, powerless, indebted, dependent, and bereft of any social, emotional comforts. The relationship between average income and expenditure in an economy at the optimum level is a zero sum game, usually expenditure shoots above income. Relative less cost of food as percent of income doesn’t mean people can save surplus income, the system has to extract costs from elsewhere to provide full employment for the population.


In developed economies, a household spends at the minimum one-third of net income on varieties of insurance and social security, another one-third on rent, food, and transportation, the remaining goes to day care, debt, mortgage payment and other miscellaneous expenses. Instead of paying more money to farmers or skilled artisans, they pay extra money to insurance companies, doctors, real estate agents, banks and government. The net economic worth of the majority of the population is either close to zero or negative, mostly wage bondage is the means of livelihood. In so-called developed economies of the west, the service sector is very inefficient and hugely bloated.


If economic architecture allows institutions like family, community to thrive, some of these areas in the service sector don’t need major human resource involvement. For example, in the American economy, the service sector share is 80 per cent of GDP with the same employment share. Health care and social assistance employs a staggering 12 per cent of the population, food and hospitality business provides 10 per cent employment, government employment is 15 per cent, financial services 5 per cent, whereas less than 1 per cent are employed in agriculture, the most important activity for life. In the name of mathematical or business efficiency, they have created inefficiency in the overall economy, resource utilisation, society, environment and life.


So here is the tradeoff - people have to choose between a predominantly service-oriented urban economy that extracts heavy costs from family, community, resources, environment  and overall human psyche or a more balanced approach that recognizes and respects diversity in economy, population and environment. An approach that keeps population linked to their physical, emotional natural habitat and economy hinged to the real source of all prosperity.


A balanced economy needs thorough social and economic planning. The first and foremost rule is to achieve balance between the three major sectors of agriculture, manufacturing and services. Narendra Modi has often articulated a sacred formula for GDP composition. He proposes one-third contribution each from agriculture, manufacturing and services. This sacred formula has to be enshrined in the preamble of the constitution so that political vagaries and power politics can’t manipulate it. The entire socio-economic architecture has to be planned to confirm this formula.


This formula is sacred because the entire structure of the economy and the resulting socio-cultural lifestyle is dependent on it. Just as honey bees search for honey, people look for opportunities where there is concentration of wealth, the GDP contribution of a sector is an indicator of wealth available in that sector vis-à-vis other sectors. So, if agriculture’s contribution to GDP is one-third, then a significant proportion of the population would automatically link to it. The tragedy in the Indian economy is that agriculture with just 18 per cent of GDP supports 52 per cent of the population, the biggest contributor for farmer suicides.


While GDP growth indicates growth in goods and services, GDP composition is about the relative pricing of goods and services between sectors. In the Indian context, agriculture products are underpriced by design to facilitate a smooth profitable environment to the service sector and export sector that earn foreign exchange. The Indian economy has a huge export-oriented service sector where most new money in the economy is being created; the primary reason behind its abnormal growth at the cost of other sectors is so-called liberalization. The much hyped trickle-down effect is not happening; money is circulating within the service sector and inflating urban real estate, other essential services and stock markets. Government doles like MNREGS are aggravating the situation for farmers by boosting the costs of farm labor. The agenda is to choke the farmer from all sides and drive him away from his farm so that land sharks and corporations can take over.


The immediate step to rescue Indian farmer is fair pricing mechanism determined in consultation with farmer representatives, this would make life difficult for urban middle and lower classes not part of modern export sectors, but it has to be done, may be in phases. Many state governments already extended food security net for low income groups.


Long term measures needed to ensure significant GDP share from agriculture, the problem with export driven economic architecture is all sectors have to focus on exports to maintain overall balance in the economy, so some focus on exports from agriculture sector is also inevitable till the time India becomes free from critical dependency on foreign exchange.


So one-third GDP share from agriculture has to be achieved with a proper mix of fair internal pricing and export of surpluses. With money in the farm sector, people would gravitate to it, but more critical measures are required to stabilize the sector, maximize self-employment, and make it independent and vibrant.


The most important step in that direction has to be land reforms. Currently, a huge percentage of farmers in most south Indian states are tenants. They rent land from a city owner and make very little income after paying rent. Maintenance of land ownership has to be decentralized down to the panchayat level. Some radical changes are required, with exclusive ownership rights to those who actually practice farming. The sale of farmland has to be restricted to farmers and prospective farmers. People from other occupations can own limited farmland, may be 2-3 acres, but must not be allowed to earn rental income from it. The panchayat could give this land for farming via auction to a practicing farmer each year and make some revenue; the owner can reclaim it whenever he is ready to farm the land. This is required to maintain stable agriculture sector with significant GDP and employment share.


The total arable land in India is around 160 million hectares. In an ideal scenario, when 33 per cent population is engaged in agriculture and allied activities with 33 per cent contribution to GDP, there would be 80 million families at current population level dependent on agriculture, half of them as farmers and half in support roles. This means the average farmland for 40 million farm households is four hectares; four times this average (16 hectares) can be fixed as the upper limit for farmland ownership. This will prevent the rise of neo-zamindars while giving enough scope for the average farmer to raise his standard with hard work and entrepreneurship. The pricing mechanism has to simultaneously ensure fair share to agriculture in GDP and prevent fall in farm produce endangering the country’s food security. A four year annual food requirement average can be priced at 33 per cent GDP; this would motivate farmers to meet the country’s food requirements and make money. The 33 per cent share in GDP in agriculture would ensure an efficient, healthy economy and healthy population, and prevent overcrowding in service sector.


Credit is important for sustaining growth and funding infrastructure in agriculture. The entry of corporations even in agriculture infrastructure is neither necessary nor desirable. The entire agriculture sector must function on a decentralized model. A separate banking network with an apex national bank for agriculture to infuse credit into agriculture at par with other sectors through a network of farmer-owned cooperatives is necessary. In fact, it would be healthy if banking operations are divided by the three sectors of the economy from top to bottom with three banking heads, representing each sector, mandated to decide the country’s monetary policy together. When the Election Commission has three heads, why should the RBI rely on the wisdom of one chief?


An extensive storage and marketing infrastructure is the backbone of agriculture. But even after 60 years of independence grain rots in government storages in a country with a huge under nourished population. The country needs the capacity to store at least two year staple food requirements. Decent cold storage facilities, preferably working on solar power, are needed to achieve price stability and ensure continuous supply to markets.


An important aspect of agriculture is quality output which is directly related to soil quality. Soil is not a magical ingredient that can forever produce food in the same quantity and quantity; top soil has to be replenished periodically with essential minerals. This soil replenishment process, critical to sustaining food supply, is not entirely within the human realm. Microorganisms and earthworms bring mineral rich soil from several feet down the earth surface to the top, cow dung and other animal waste act as catalysts to this process. In the absence of this natural process, soil turns barren. The use of chemical fertilizers to artificially enhance soil quality destroys this natural mechanism, pollutes the entire food chain, water, air and makes farms barren. The economic cost for farmers is also huge with the ever increasing quantity of chemical fertilizer required with ever-increasing costs. There is something fundamentally wrong with a civilisation that claims to be advanced but can’t even ensure quality food for people.


A large scale return to organic farming has to be planned on war footing with focus on integrated approach between farm and animal husbandry. The pink revolution designed to destroy Indian stock of milch animals would soon lead to mass scale starvation if not stopped. An integrated decentralized infrastructure for farm inputs and outputs like organic fertilizer units, seed banks, farm equipment, marketing, storage facilities need to be evolved with active farmer participation. This has huge meaningful employment potential.


Water is an essential ingredient for farming. While big dams may seem economical and in some cases necessary, they discourage local water conservation by people. A judicious mix of medium dams and local water conservation wherever possible can maximize water utilisation without too much burden on rivers and associated ecology. India is blessed with rivers all across the land, but they are heavily burdened with mindless projects. The approach of diverting every drop of water from rivers for human consumption is like draining every drop of milk from the cow with nothing left for the calf. Some river water has to reach the sea in order to prevent the ingress of salt water in coastal areas and to keep the river system healthy. River linking may be desirable in a specific area, but a national river linking from north to south is neither necessary nor desirable.


Diverse eating habits keep people healthy and promote diversity in farm produce; monoculture has to be avoided and specific targets set at national, state and district level according to the local topography. There is no need to flood every field to raise water intensive crops; many profitable crops can be raised with limited water resources using latest drip irrigation techniques. As Narendra Modi has explained in numerous speeches, trees planted to mark the borders of farms can bring both economic and ecological benefits.


Technology can help agriculture in many ways, but the modern economic architecture forces its usage as a tool to manipulate, control and poison people and nature. This thirst for control now wants to manipulate the seed of life to commercialize it in the name of Genetically Modified crops. Modification of genes over a period of time may be part of nature, but no group, however superior their claims of knowledge may be, has the right to mess with the seed of life.


Agriculture requires sensitivity to succeed. Society has to treat farmers with dignity and respect. Farmers are no less talented or less scientific than an engineer or doctor; their perception of nature is in fact superior. The divine embodiment of all knowledge, Yogeswara Krishna, was a simple cowherd. The enlightened in our tradition lived in forests and rural areas to gain knowledge, they performed yajnas for prosperity of the farm, and this is the essential character of our civilization.

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