The Hindu : Persisting with folly

Online edition of India's National Newspaper
Monday, Dec 02, 2002

Opinion

Opinion - Leader Page Articles

Persisting with folly

By Bhanu Pratap Singh

The solution to the problems of India's economy lies in faster and fuller development of the farm sector.

A QUICK look at the achievement of the economic reforms in India, adopted in 1991, will show that the GDP growth rate between 1990-91 and 2001-02 has been 5.58 per cent per annum, marginally less than the 5.62 per cent achieved between 1980-81 and 1990-91.

During the period of economic reforms, i.e. from 1990-91 to 2001-02, the performance of our farm sector has been very disappointing. During this period, the growth rates of production of all crops, as well as of foodgrains, have been only about 1.6 per cent per annum, which is less than the growth rate of our population. During the same period, employment generation grew by less than one per cent leading to growing unemployment and poverty.

The economic reforms have also failed to check the Government's wasteful expenditure. The gross fiscal deficit of the Government of India as percentage of the GDP, instead of decreasing, has been increasing. Interest payments by the Government, now exceed its total Plan expenditure.

It needs to be realised that all increments in the national income do not necessarily benefit the bulk of the nation's people. During the last 11 years of reforms, out of the total additionally generated national income, only about 14 per cent accrued to agriculturists who still constitute about two-thirds of our workforce, and 86 per cent went to non-agriculturists.

The basic defect in the development strategy pursued so far is that we have been indulging in establishing large-scale public sector enterprises, and creating perhaps the largest bureaucratic structure in the world. In doing all this, we have ignored the common man, his needs and aspirations. The policy changes called "economic reforms" have not altered the situation. All that has been done is to facilitate the entry of foreign capital and technology into the country for more efficient use of our natural resources. This in itself may not be wrong, but this will not lead to any significant improvement in the lot of our common people, who are not in a position either to buy the shares of the huge companies being floated, or the elitist goods they will produce. In fact, socialist gigantism has given way to capitalist gigantism. In our past and present strategies, we have ignored the fact that human and agricultural developments are the only two strong foundations on which the edifice of prosperity of any country can be built.

Had we even attained the average productivity of Asia, we would have produced more than 100 million tonnes of surplus foodgrains for export. This is more than what the U.S., the largest exporter of foodgrains in the world, is currently exporting. If we can find buyers for our surplus foodgrains, we can earn about $15 billion annually in foreign exchange. If we cannot find buyers for such large quantities of foodgrains, we can switch over to production of fruits, vegetables and animal products for which there is a growing demand the world over. The solution to the problems of India's economy lies in faster and fuller development of the farm sector.

Once it is decided that we should strive to fully realise our agricultural potential, the next question is how can it be done? Faster growth in agriculture cannot be achieved unless more capital is invested. India's average, undernourished farmer and his two slow-moving bullocks cannot produce more than what they have been doing, howsoever generously they are fed on political rhetoric. They need modern tools of production such as high yielding seeds, fertilizers, pedigree animals, agro-machines and efficient irrigation systems. All these need capital investment. New seeds and other technological innovations do help; but to utilise these, capital is needed. The need for capital investment in agriculture is the least talked about subject among our policymakers. The reason is obvious. Most of our available resources are diverted for industrial and bureaucratic growth. Capital formation in the farm sector, as a percentage of the total, has sharply declined. In 1980-1981, capital formation in the farm sector was 15 per cent of the total in the country, which had declined to eight per cent in 1999-2000. This declining trend is due to the declining profitability of agriculture, which, in turn is due to the continuing adverse terms of trade for farmers.

Governments at the Centre have been claiming that to protect the interests of farmers they have been judiciously fixing the Minimum Support Prices (MSPs) of farm products, and when farmers were unable to sell their produce at prices higher than the MSP, they came to their rescue. Both these claims are not quite true. Indices of MSPs of wheat and paddy with 1970-71=100 as the base year have always been lower than the indices of "all commodities". As regards the claim of purchases from farmers at MSPs, the reality is that more than 80 per cent of the total Government purchases of foodgrains is made only in three States — Punjab, Haryana and Andhra Pradesh, whose combined production of foodgrains is less than 25 per cent of the country's total production. Farmers of other States, who produce more than 75 per cent of the foodgrains in the country, do not get the benefit of Government purchases even to the extent of 20 per cent. Coarse grains are not purchased, except nominally. More than half the rice is procured as levy from rice-mill owners who are under no obligation to buy paddy for their mills at the announced MSP.

A vicious circle has set in the farm sector. Poor productivity, multiplied by poor prices, leading to poor incomes, savings and investments, again resulting in poor yields. So long as this vicious circle is not broken, our farm sector cannot make rapid progress, nor can the poverty of our rural masses be eradicated. Is it just, or even rational to create conditions in which capital formation in the farm sector is reduced to less than one-twelfth of the total in the country? This while the sector still contributes nearly 24 per cent to the national income, and provides livelihood to nearly two-thirds of the population? Statistical jugglery cannot hide the fact that the disparity ratio between the real incomes of agriculturists and non-agriculturists has been ever widening. It was 1:2.2 in 1950-51; now it is 1:4.75.

Some seek to justify the rural-urban disparity by making the generalised statement that farmers compared to non-farmers are poor all over the world. This is not true. In any case, the disparity is not so wide as it is in India. Sometime back, an enquiry at the various embassies in New Delhi found that the average income of farmers as percentage of average income of non-farmers was 90.6 in the U.S.A., 84.7 in Australia, 140.2 in Japan, 87.9 in the Netherlands and 89.9 in New Zealand, compared to only 21 in India.

At least from now on, we should pursue the path of humanism to ensure the well-being of the nation as a whole, and not merely of its thin upper crust. How we have neglected the masses is evident from only two facts: (i) that the mean years of schooling of rural children is less than 3 and (ii) that nearly half of those who die in villages do not get any attention from qualified doctors. Humanism is based on the belief that a country's progress ultimately depends on the knowledge and character of its own people, and not on what it can get from abroad. We should pay more attention to developing our own resources, instead of depending on outside help which will never be unconditional. The quality and productivity of our people can improve, only if the often-repeated promise of our Constitution of reducing inequalities in incomes, opportunities and facilities amongst our citizens is fulfilled, irrespective of their economic condition, religion, caste, language, region, or vocation. If democracy is to survive in India, everyone born in the country must have equal opportunity to learn, work and receive remuneration according to a nationally accepted policy on prices and incomes.

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