THE EXCHANGE. Rooted in poor economics

While discussing agriculture in India, we rarely look upon it in terms of truly being India’s largest private sector operation, employing the highest number of people and fulfilling the most critical and strategic need of the nation. I believe judging it in this manner can show it up in a different light. Like all areas in the economy — which get affected by economic cycles or sometimes just for want of better policies — it needs rational nurturing, repair and protection.

This becomes all the more important since the people involved are at a very low income strata with essentially no safety nets and a larger multiplier effect via dependents. To believe that knee-jerk or politically expedient responses can do the job is wishful and essentially escapist.

While post-1991 reforms covered industry and commerce comprehensively, it is unfortunate that agriculture remained largely unreformed, and in effect either controlled or was victim to State policies or natural vagaries. Instead of real reform, we see frequent political benevolence.

At the same time, the reality is that significant imbalances, large and small, crept into the sector, leaving many farmers with diluted economic power. Fragmentation over time brought down farm sizes, even as a few consolidated their muscle, leading to increased social and political strength.

The country urgently needs sustainable strategies; the past has mostly tried to tackle symptoms but probably never went far enough to systematically tackle basic obstacles. Each key sector in the country — agriculture, industry, services and infrastructure — participates in the growth of our economy; so it is a no-brainer that policy reform must not ignore any sector.

It is necessary to increase national income substantially just to secure the basic needs of many families. Is it not obvious that the biggest boost will come from uplifting incomes starting at the lower end of the pyramid? Agriculture uses 50 per cent of the national workforce to create 15-18 per cent of the GDP — one way out is to create non-agricultural jobs. The bulk of alternate jobs cannot be created without broad-based growth in commerce and infrastructure, and even then, such growth can provide jobs only for a portion of the people.

The problem of under-employment (or disguised unemployment — which means people employed at less income than they merit due to lack of alternate livelihood opportunities) in agriculture can persist for long.

Any enterprise can sustain itself only through sound forward-looking policies for its ecosystem. Just as a business cannot be supported or made viable through subsidies, agricultural enterprises also deserve to be made highly self-reliant. We know smaller scales lead to unviable propositions in business; they obviously do so in agriculture, too.

As a beginning we must attempt to resolve fragmentation, which has a direct bearing on productivity and viability. Should we not create innovative policies to aggregate land holdings under a cooperative or any other fair mechanism? Each government tries to support sub-optimal farming enterprises through increased subsidies at every stage of production, distribution or financing. Why can we not instead look to holistically address procedural and physical fetters or controls in the “ khet-se-thaali ” (from farm to plate) chain?

The thrust to ensure inherent viability must not revolve around simply enhancing financial outlays the country incurs on farming, but on squeezing the last productive mile out of the spending. Overall, we need to redirect government spending into ensuring water and power availability, improving connectivity (roads and canals), better preservation of produce (cold storages), and distribution linkages (including through e-commerce and eliminating middlemen).

Direct links with food processing plants, and technology interventions such as soil health checks and better seed options, are worthwhile options. The former can address large wastage that takes place in fruits and vegetables, and private technology cooperation has been seen to yield 50 per cent water and 60 per cent fertiliser savings. Next-generation infrastructure, particularly in storage and distribution supply chains, is a crying need.

The core point remains that agriculture requires a sound policy environment based on rational economics which is predictable yet dynamic, just like what industry or services need. If handouts or subsidies become the only way to keep agriculture afloat, the nation will stand weakened.

Relentless political posturing seems to suggest that there are vested interests that seek to thrive at the expense of agriculture; or that our manufacturing and infrastructure ambitions are capable of compromising farmer interests. Nothing is farther from the truth. Political convenience in linking (for example) land acquisition with rural distress (which has entirely other, sometimes god-driven, reasons) or greed, is not rationally borne out and will most likely end up harming the very people sought to be protected.

The stark reality today is that mature farmers no longer find comfort in their successors pursuing farming. More to the point, the aspirations of today’s young are significantly divorced from the realities of the farm, and farming is really an occupation of low choice. Looking beyond land-owners, we must keep in mind farm-workers whose successors also need better options.

So, besides creation of alternate livelihoods in the manufacturing and service space, we must make agriculture sufficiently profitable to keep a reasonable portion of population anchored there.

Winston Churchill said (in another context), “When the situation was manageable it was neglected; now that it is out of hand, we apply too late remedies which might have then affected a cure.”

Agriculture must be made fiercely competitive, and a career of choice, with the same zeal we attach to manufacturing or services. Political indulgence has had its day as have short-term and reactionary solutions. We must bring back the pride to our largest private sector enterprise through rational and progressive initiatives.

This column explores ideas and opinions on Indian enterprise and economy. The writer is an entrepreneur and former president of Ficci. The views are personal