Which is the least reformed sector of the Indian economy? No prizes for guessing the obvious answer, agriculture. But that is not open season for the reform-or-die brigade to tilt yet again at the bogeys of minimum support prices, input subsidies and agriculture produce marketing committees. Surely, they all need to change drastically, but it would be wrong to assume that these would constitute effective reforms.
Most often, farmers themselves anxiously invite interventions. Witness mounting cries at present for relief from damage caused by unseasonal rains, even from areas only marginally affected (and enthusiastically amplified by the media). Government succour could ameliorate misery, but it would also effectively further tighten the straitjackets affecting farm decisions.
The Indian peasantry's misery has continued unabated since medieval times. It was in thrall to local lords in peace times and served as conscripted cannon fodder during conflicts. Modest reforms such as Raja Todarmal's revenue administration under Emperor Akbar degenerated into tax collectors becoming zamindars within a generation or two.
Farmers remained tied to their land, partly because of custom, partly because of kinship and partly because the caste hierarchy decreed occupations. Then, as now, they toiled hard, but could show little enterprise. India, thus, never had yeomen peasantry, the bedrock of development elsewhere.
In David Ricardo's England at the turn of the 18th century, peasant farmers could move if the rent exceeded the difference between production capacity of the land and margin of production (produce from the best available rent-free land) and could even give up farming altogether. Vast numbers actually did, becoming foot soldiers of the Industrial Revolution. The story repeated with small variations across what is now the developed world. Agriculture was no longer the mainstay of livelihood.
By contrast, the numbers of farmers in India grew, but land never could. As more and more inferior land came under the plough, production capacity declined. Rents remained constant or grew because of demand pressure and farmers became immiserised. Average holdings declined into atomistic parcels. This process continues to date.
Risks, both physical and market, compounded the distress, effectively removing much of the incentive for innovation. This manifests most dramatically in the unchanging cropping patters. Even with new crops or inputs, a one-time step change occurs, but not a sustained shift away from the paradigm. Seventy years ago, Maharashtra began irreversibly extracting Palaeolithic water trapped in the Deccan Plateau, to introduce sugarcane. Bhakra Nangal waters in Punjab and Haryana in the 1960s made summer cultivation of paddy a major activity. Soyabean replaced dry millets in western Madhya Pradesh in the 1980s. But that is where these situations remain two and three generations hence.
The rare success story is Saurashtra, which bemoaned for decades the high degree of risk in its staple, groundnut (only two out of 10 seasons provided attractive returns), yet continued with it. The stranglehold was broken in this century, with the advent of Bt cotton and micro-irrigation. Whether this will become an exception remains to be seen.
T N Ninan recently discussed the wastefulness of some of our agriculture. As he said, export of rice and sugar is export of water. One unit of rice needs 6,000 units of water. We export six billion cubic metres of water, 0.5 per cent of all usable water, per million tonnes of rice export.
Sugarcane is equally water-intensive. Uttar Pradesh and Bihar, major producers both, have lower cane yields and sugar recoveries as compared with the southern and western states. Yet this inefficient production determines cane support price.
India urgently needs to diversify its cropping pattern to conserve moisture, so that water wars between agriculture and other uses do not destroy the social fabric and available water is used optimally. Shift away from flood-irrigated paddy and water-intensive sugarcane are both possible and desirable, but do not happen partly because farmers do not accept them as they perceive alternatives to be risky and partly because of powerful political interests vested in these crops. Amarinder Singh's efforts to diversify the Punjab agriculture got nowhere because of strong political opposition. Sugar barons of Maharashtra and politicians in the north fight every effort to reduce the importance of the crop in their regions.
Subsidies and price supports were thought of as quick means of introducing innovations. But that they should remain temporary expedients at best, giving way to market mechanisms as the innovation proves its potential was overlooked, possibly deliberately, because handouts consolidate vote banks. Even as farmers are addicted to subsidies and support, risk perception remains unchanged.
Indian crop insurance even as modified periodically really protects input loans. The current rain damage relief comprises subsidies for inputs. That does not quite protect farm incomes, the most effective way of covering risks. Crop insurance is tricky, since a host of premium payers face distress simultaneously. In other businesses, premium income from large numbers of the insured compensates far fewer sufferers. Designing effective crop insurance is possible, but requires firm policy commitment, not much in evidence yet. (This was written before Ashok Gulati's column on crop insurance in The Indian Express, on April 13, 2015, with which I broadly agree.)
Until that happens, all talk of agricultural reform will remain just that. Farmers today think land is an unbearable burden, but have nothing else to fall back on. They are as animals on the road frozen in the headlights of oncoming traffic. In over 40 years, I have never met any farmer who wanted his son to farm. They would readily quit agriculture if only they could.
Rooted in soil suggests growth. Transfixed in it suggests loathing and desperation at being trapped.
The writer taught at Indian Institute of Management, Ahmedabad, and helped set up Institute of Rural Management, Anand