It's time we busted a few myths and revamped our strategy towards the farm sector.

In recent weeks, there have been growing apprehensions that the monsoons of 2009 will fall short of normal. This has again raised fears of rising food prices, collapse in rural incomes and possibly farmer suicides. Many a tear will be shed for rural India. Predictably, there will calls for greater support for the agriculture sector in the form of subsidised fertilisers/pesticides, cheap electricity for pumping ground water and farm loan waivers. We have been doing this now for generations now and our impoverished farmers still commit suicide. Surely, it’s time to rethink this strategy.

Rural India and its myths
There are many myths about how to help the rural economy. First, the idea that the route to prosperity in rural India lies in accelerating farm production. Agriculture now merely contributes 16.5 per cent of the economy and even with great exertion it cannot be made to grow much more than 3 per cent per annum on a sustained basis (when the rest of the economy routinely does 7-8 per cent). Indeed, very large investments in water systems are needed to maintain even the current growth path. With around 70 per cent of the population still in the villages, it is absurd to hope that such a small and slow-growing part of the economy can bring salvation to such a large population. The villagers know this and are rapidly diversifying their incomes. As studies by economists like Dipankar Gupta suggest, non-agricultural activity already accounts for around half of rural India’s economy and provides employment to 35-45 per cent of the rural workforce.

The second myth is that we need to accelerate agricultural production in order to feed a growing population. In reality, India already produces enough food to feed itself but around 20 per cent of output is wasted. The problem is one of distribution and storage, not production. Furthermore, population growth is now 1.6 per cent per year and, therefore, we need to grow production by no more than this rate. Since population growth is slowing, we should perhaps slow agricultural growth over time if we do not want even greater wastage or a structural price decline. Yes, we need a buffer for drought years but surely the solution is better management of bumper crops rather than ever more production.

Third, encouraging agricultural growth for exports in not a viable option for India. Export of agricultural products is tantamount to export of water. International trade may make sense for some niche products like tea or for managing natural cycles in food-stocks. However, it cannot be a central strategy for a water-starved country like India. It is especially careless to be thinking about exporting water when climate change may be putting even current supplies at risk.

Finally, we must recognise that farming comes with a large environmental cost and that the Green Revolution is anything but “green”. Current farming techniques are severely damaging to the environment through the depletion of ground water, conversion of forest land and over-use of pesticides, fertilisers and other chemicals. In turn, this is sacrificing the long-term viability of the farm sector. It may have made sense in the ‘70s to force a level-shift in food-grain production but why should we be still sacrificing the food security of future generations? Surely it makes more sense to strictly conserve ground water and use it only when the monsoons fail.

What should we do?
The implication of the above factors is clear: India should shift focus from increasing agricultural production to improving its efficiency. It is enough that food production grows broadly in line with population growth (ie 1.6 per cent). Instead, investment should be encouraged in storage and distribution. Special attention should be given to water management (as opposed to extraction). Agriculture consumes 80 per cent of the country’s fresh-water in order to produce just 16.5 per cent of GDP. This is very poor use of a scarce resource.

Meanwhile, policies should be aimed at encouraging the process of moving the rural economy away from agriculture. The aspirations of rural India have already shifted — the literate children of subsistence farmers want real jobs, not pesticides. Why should we stop them? However, this requires a big shift in policy mindset. For instance, we need to shift from a regime of cheap but irregular power supply (which may work for irrigation) to one that is fully-priced but regular (necessary for the non-farm sector). This is our best bet for making India drought-resistant.

Next, we need to revisit general governance in rural India. The traditional structures may have worked for subsistence farming (even this is debatable) but they will not support large investments in industry, construction and services. The government needs to focus on how to deliver policing, enforcement of contracts, property rights and so on. This is about shifting from a world of farm-loan waivers to one that can support large-scale mobilisation and investment of capital in these areas. The Naxalite movement that affects a fourth of India is not due to the failure of agriculture but the failure of governance. At the same time, note that the cause of property rights and governance is not served by the indiscriminate use of “eminent domain” to acquire large chunks of land for so-called SEZs. The need is for a framework of governance that allows industry and services to grow organically in response to local conditions.

Finally, there should be a greater effort to provide urban amenities for education, health, shopping and leisure at places that are accessible to the rural hinterland. Together with the shift to non-farm jobs, this provision of amenities will inevitably lead to urbanisation. This is a good thing and should be encouraged. However, urbanisation is not just about migration to the mega-cities of Delhi and Mumbai. As discussed in my previous column (“Small-town India holds the key”, June 11, 2009), mofussil towns need to be revived as social and economic hubs.

To sum up, we need to stop being obsessed with increasing agricultural production beyond the minimum that is needed for food security. Farming is not economically or environmentally viable as a way to uplift rural India. Rural India already knows this and our policymakers should accommodate their aspirations. The focus of agricultural policy must be to improve efficiency rather than total output. In a year when we face a possible monsoon failure, we need to think especially about how to improve the management of water.