Towards true rural reform

As the root cause of rural distress is income deficit, enhancing incomes is key to reforms

If ever a system begged for reform, it would be village India. Reform is a different way of doing things, and not just more or less of something. Abandoning administered prices in favour of market-determined prices is reform, but not increasing or lowering government-controlled prices.

Since the root cause of rural distress is income deficit, enhancing incomes is the key to rural reforms. This does not mean that other concerns — health, education, communication, infrastructure — are not important. It simply asserts the primacy of incomes. Ask anyone to choose from a binary of income versus any of these other development goals and the answer will be invariably income.

Andrew Sheng makes an illuminating distinction between traditional, family and kinship-dominated production arrangements and modern, institution and market-dominated ones. He avers that China made rapid progress towards ushering in the latter, even in individual-managed agriculture plots. This is one of the pillars of China’s phenomenal growth since the 1980s.

Productivity reform is not more inputs for greater output but a judicious use of inputs for maximising output. Indian agriculture today faces challenges of excessive and wasteful dependence on rapidly depleting water resources, a near-monoculture orientation of farmers in the granaries of Punjab and Haryana, a neglect of sturdy coarse cereals (jowar, bajra, ragi), stagnation in oilseeds and pulses, and uneven geographical spread.  These are compounded by increasing climate uncertainties, with unforeseen and unpredictable variations in precipitation. These risk factors need to be addressed through technology.

Technology for agriculture is perceived as the classic case of doing more of the same, ever since the Green Revolution four decades ago. There is much talk of a second Green Revolution, but not much has happened. Meanwhile, about the only true reform that has taken root in India is the acceptance of the genetically modified (GM) Bt cotton, despite the presence of strong lobbies and the relatively lukewarm response of the government to begin with, which has turned hostile to GM over time because of presumed environmental concerns.

Affordable infrastructural reforms would include easing in rural silos and conversion of some bulk rail and road carriers to carry agricultural commodities as well. Phasing out gunny bags would not only cut wastage and cost, but would also reduce back-breaking and demeaning drudgery. Rural cleaning and grading centres would make vegetables and fruit travel to urban markets in a better condition even without refrigeration.  What works for tomatoes, grapes and apples could work for cauliflowers and oranges as well.

Marketing reforms need realistic assessment of situations. What makes agriculture produce marketing committees work in Gujarat at Kadi with cotton, Ahmedabad and Surat with vegetables, in Maharashtra at Pune and Narayangaon with vegetables, in Madhya Pradesh at Sehore and Guna with wheat, and not elsewhere with other commodities? How do commission agents coexist and compete fairly with government and organised private sector initiatives such as ITC’s e-choupal in MP and become gougers elsewhere? How did dairy cooperatives gradually manage to improve their efficiency and profitability over a period? Answers to these relevant questions will become the building blocks of a reformed supply chain.

Farmers need support from enterprises and government, which must demonstrate their commitment through specifics, such as provision of planting material, needed inputs and advice, remunerative prices and amelioration of market risks, leading to an income attractive enough to dissuade any thought of default.

Agriculture is the employer of the last resort and supports populations beyond its potential. The critical need is to aim at reducing dependence on agriculture. The ultimate test of sustainable poverty elimination is a fall in the absolute numbers dependent on agriculture for their existence.

The real task is to create employment opportunities outside agriculture in rural areas. A thorough overhaul of rural infrastructure, including transport and commodity storage on- and off-farm could well contribute substantially to this objective. Artisanship of high order is located in many pockets. These skills could be used advantageously to launch labour-intensive industrial enterprise, as China did on its way to becoming the workshop for the world.

Tried and successful activities and experiments need to be enlarged in scope and widened in application. A whole new shelf of activities flexible enough to exploit local skills and resources to the maximum needs to be created. Some of these would be eminently amenable to scaling up, as well as public-private partnership. This would be diametrically different from the present city-centric infrastructure where benefits trickle down. True rural development implies benefits welling up.  

All these initiatives still require a road map for immediate relief from distress, to be discussed in the concluding piece in the series.

To be concluded tomorrow

The author is an economist and founder-director of Institute of Rural Management, Anand