Celebrating the fact that per capita agricultural income is increasing faster than overall per capita income, the government is targeting 4% growth in agriculture in the Twelfth Plan period. But this is a rosy view that does not stand up to scrutiny, says Rahul GoswamiRead Part 2 of this article here
How much food will India need to grow to feed our population in 2011-12? How much in 2013-14? Will we need to import wheat and rice or will we be self-sufficient? Do we know the environmental cost of this self-sufficiency? Are we willing to bear it? These are the questions that the Government of India, its ministries and its planning agencies must find answers to before the start of the Twelfth Five Year Plan period, which is 2012-17.
The foodgrains view from mid-2011 is one of relative comfort -- 235 million tonnes is the estimate (including 94 mt rice and 84 mt wheat).
From this position, the Government of India has a set of six broad-brush objectives. These it wants its ministries and departments, connected directly and as adjunct to food and its provision, to internalise. It wants state governments to shape policy to support these objectives, which are:
* Target at least 4% growth for agriculture. Cereals are on target for 1.5% to 2% growth. India should concentrate more on other foods, and on animal husbandry and fisheries where feasible.
* Land and water are the critical constraints. Technology must focus on land productivity and water use efficiency.
* Farmers need better functioning markets for both outputs and inputs. Also, better rural infrastructure, including storage and food processing.
* States must act to modify the Agricultural Produce Marketing Committee (APMC) Act/Rules (exclude horticulture), modernise land records and enable properly recorded land lease markets.
* The Rashtriya Krishi Vikas Yojana (RKVY) has helped convergence and innovation and gives state governments flexibility. This must be expanded in the Twelfth Plan.
* The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) should be redesigned to increase contribution to land productivity and rain-fed agriculture. Similarly, the Forest Rights Act (FRA) has potential to improve forest economies and tribal societies. But convergence with the National Rural Livelihoods Mission (NRLM) is required for strengthening rural livelihoods.
Are these objectives reasonable? Are they equitable and will they encourage an agriculture that is ecologically sustainable in India? From a resources use perspective, the government is right to point out certain constraints (land and water) and administrative improvements (land records, using NREGA labour for farm needs). The direction to provide better infrastructure in India's rural districts, the better to link farmers to markets with, has been stated in every single Five Year Plan for the last five plan periods, and has been repeated in every single plan review and even more often in the Economic Surveys which accompany the annual budgets. (Under the Bharat Nirman programme, this need has to an extent been met, but the beneficiaries are as likely industry and land developers as they are cultivators.)
Protecting livelihoods in agriculture, cultivation and from use of forest produce is not, however, a central aim for food and agriculture in the Twelfth Plan. This omission, surprising from the social equity point of view, is taking place because the central government has before it three points it is trying to make sense of, and to decide the best way to tackle. In brief, these three points are: there is a "structural change" taking place in nutrition (more consumption of dairy and meat); there are world factors influencing foodgrain production, consumption and use in India; there are indications that agriculture's share of GDP is today edging higher than it was five years ago, and that per capita agricultural income is increasing faster than overall per capita income.
The structural imbalances of Indian agriculture
It is the last trend, as seen by the central government although not by smallholder farmers and marginal cultivators, which is being taken as proof that new approaches to agriculture are delivering income benefits. The new approaches revolve heavily around the provision of infrastructure that aids modern terminal markets, agri-logistics, cold supply chains, integrated farm to retail companies, agricultural commodity traders, private warehousing service providers, export-oriented food processing units, contract farming operations which are linked to branded processed food, and exporters of cereals, fruits and vegetables. It is here that the growth in agricultural GDP is taking place and it is here that the rise in per capita agricultural income is being recorded. The central government will fight shy of a real cost-real price district analysis of agricultural investment and income because it will reveal the huge structural imbalances that are forming -- that is why a national outlook artificially disaggregated into states becomes far more comfortable to defend.
What of the world factors influencing India's agricultural sector? There are two parts to this answer. One part is to be found in India's foreign trade statistics, which are collected and disseminated weekly by the Directorate General of Commercial Intelligence and Statistics. These indicate the size and reach of India's agricultural produce traders, and are the best source of knowledge on the signals that the world market gives to India's traders, many of whose operations are linked to the country's financial markets and the commodities exchanges (five national, 18 regional). The other part is to be found in the data and forecasts of the Food and Agriculture Organisation (FAO), the US Department of Agriculture and of the giant international grain trading corporations (such as Archer Daniels Midland [ADM], Bunge, Cargill and Louis Dreyfus, which account for between 75% and 90% of the global grain trade). These organisations -- inter-governmental, government-specific and MNC -- watch South Asian agriculture and consumption minutely, for India and China are the swing producers and consumers of the world.
Add processed foods to the meat and dairy reasons for structural nutritional change and the agricultural GDP picture becomes clearer. India's food industry depends on this nutritional change for its continued breakneck pace of growth -- it was estimated by the Federation of Indian Chambers of Commerce and Industry (FICCI) in 2010 to be Rs 814,500 crore (USD 181 billion). This enormous industry is expected to grow almost 30% by 2015 to reach Rs 1,160,000 crore (at current prices, USD 258 billion) and then again by 23% to become Rs 1,430,000 crore (at current prices, USD 318 billion) in 2020. It is the increase in per capita disposable income by 8% over five years -- which has led to an increase in per capita consumption expense of 20% over five years -- that the industry associations have based their forecasts on. From the GDP-centric point of view, it is India's 192 million lower-income households which are expected to become middle-income households that will, through their consumption habits, through their exercise of structural nutritional change, boost the country's agricultural GDP and with it India's totemic 9% per year growth rate.
This is a rosy view for the food industry and its web of ancillaries and its drivers in the form of the commodity-financial markets linkages. However, where production of foodgrain is concerned (cereals, coarse cereals, pulses) there is the inescapable formula of land, ecology, soil, water, seed and the farmer's knowledge and labour. Excluding all other claims of crop science, technology, fertilisers, pest management and infrastructure (and their externalised costs), the impact of 192 million households seeking to (or being incentivised to) grow their disposable incomes must also be counted. This becomes especially critical when the Steering Committee on Agriculture for the 11th Plan has estimated the demand for foodgrain to be 251.7 mt by 2011-12 (15 mt above the 'comfortable' estimate) and further estimated that the foodgrains production will have to grow at 2.21% to meet the projected demand. Will it, with the basic formula available to us?
Population growth, increasing urbanisation and income growth are the factors that the government of India and its planning agencies should already have as basic inputs for any scenarios concerning food demand and supply. With Census 2011 provisional data available, there is a need to estimate the increased demand for even the very basic food basket items. Here is a very rudimentary assessment for Haryana, for example -- using the monthly per capita consumption tables for states found in National Sample Survey Organisation report 530, the new provisional state population figures for 2011, and the rural/urban percentages from the 2006 National Commission on Population projections for state population. Rural Haryana's requirement of cereals for households in 2011 is 171,221 tonnes per month and urban Haryana's requirement is 78,645 tonnes per month. Both rural and urban requirement in Haryana have risen by about 20,000 tonnes per month over the decade. In 2001 the requirement would have been rural 152,123 tonnes and urban 57,139 tonnes. This however is only baseline household demand and only for cereals -- it does not include retail processed food.
What urbanisation will do to food flows
Equally important is the increasing dependency ratio of a growing urban population on a rural cultivator base that is not growing as quickly (or not at all, in some cases). For Haryana again, to continue the example, the urban population has increased by 2.33 million whereas the rural population has increased by 1.87 million. The increase in rural population has occurred largely in the 0-6-years age-group. For the sort of macroeconomic modelling the Planning Commission and ministries depend on to provide policy guidance, these are essential data ingredients. Are they being used? We cannot say with any certainty. Ideally, the labour participation rate of the rural population is a contributing factor (as are wages), so is the increase in the urban population which will be boosted by migration as much as by new births, so will the trend of rural population addition being of a lower average age and thus adding to the headcount number of dependents. More data releases from Census 2011 over the coming months will refine the outputs when scenarios are run, but they ought to have been included already, and there is no evidence they have been. It is imperative to, for the net effect of the race towards 9% GDP growth is that of increasing urban dependency for its food on farming households.
The provisioning of this food -- in raw form or processed -- will rely on the building of infrastructure to move, handle and store food. This is the point upon which allocation priorities in the Twelfth Plan will exercise great influence. What at this stage do the priorities focus on? The Planning Commission's 'Issues for the Approach to the Twelfth Plan' document has said: "Infrastructure investments have seen significant improvement during the 11th Plan, but the pace of infrastructure development needs further acceleration if the glaring infrastructure gaps are to be bridged within a reasonable time-frame. Although PPPs (public private partnerships) have been successful in a number of infrastructure sectors, and efforts will need to be continued in further encouraging private sector involvement, it is felt that public investment in infrastructure, particularly irrigation, watershed development and urban infrastructure, will need an additional 0.7 percentage points of GDP increase over the next five years."
The cautious stress on "public investment" notwithstanding, the central government, through frequent statements by Agriculture and Food Processing Industries Minister Sharad Pawar and by Minister of State for Agriculture and Food Processing Industries Harish Rawat, makes its true intentions clear. During an Indian Council of Agricultural Research (ICAR) and Confederation of Indian Industries (CII) meet in May 2011, Pawar invited companies to examine the "significant opportunities available in the agriculture sector, especially in research". As he has done a number of times in the last three years, Pawar called upon industrialists to have closer interaction with the Indian Council of Agricultural Research (ICAR) and develop demand-driven technologies to "benefit small farmers and other marginalised social groups". In an attempt to bring under-employment too into this omnibus solution, Pawar has said that a new cadre of agri-entrepreneurs needs to be created as "agri-businesses have the potential to create employment by means of value addition to primary agriculture".
Who will these new agri-entrepreneurs be and who will they employ? An answer is found in 'Prospects and Policy Challenges in the Twelfth Plan' (Economic & Political Weekly, 21 May 2011), by Montek S Ahluwalia, deputy chairman of the Planning Commission. "Another area for policy intervention by state governments is the reform of laws relating to leasing of land. As holdings are subdivided and become uneconomic, very small and marginal farmers may be better off leasing out their land to more viable farmers, while seeking paid employment themselves." The medium-term effect of this approach to consolidating small holdings and turning smallholder farmers into rural labourers, will be seen more clearly when the migration data for Census 2011 become available, for the process has already been under way in states which have encouraged -- whether by what they misleadingly call 'reform' of land leasing, or whether through economic coercion -- the emptying of farmland of its people. It is, in any case, not a matter for any agency, government or otherwise, to covertly influence or seek to engineer, for the agro-ecologies of India are as much a landscape wrought by the people's intimate and in-depth knowledge of local farming practices as they are expressions of the structures that bind and sustain rural communities.
It is this aspect that the central government's planners, economists and advisers are silent on, even while their support to the GDP-growth doctrine remains undiminished. Over three years ago, the NREGA began discussing what it called 'convergence' between the income-generation imperative and the labour allocation challenge. Convergence in the NREGA context meant the allocation of labour for agricultural, watershed and natural resource management needs. More than three years later, the distortionary effect of MGNREGS on agricultural labour is widely recognised. Convergence, however rudimentary, has been left too late.
Infochange News & Features, July 2011