Brainstorm Think

Ditch the Paternalism

There are many reforms that can help Indian agriculture. But first, we need to change our mindset.

This is the seventh post in our Brainstorm discussion on ‘The Crisis in Indian Agriculture’. Earlier posts: Intro12345, 6.

The Crisis in Indian Agriculture, as the subject of this Brainstorm discussion goes, is not a new one. It has existed since we existed as an Independent nation. Here’s a recap of some of the turns this debate has taken through the decades.

1960s: The Swatantra Party Opposes Collectivisation

The Swatantra Party was formed in 1959, primarily to take on the ‘joint cooperative farming’ advocated by the Congress party. Swatantra felt that this would replace the old zamindars with a bigger zamindar: the government. Thankfully, this idea was never implemented.

The Swatantra Party was of the opinion that food production should be given priority in the five-year plans, and not rapid industrialisation. The party also supported the removal of the compulsory levies and zonal barriers for the free movement of agricultural products throughout the country. Showing its concern over the problem of labour (agricultural and industrial), the party also advocated governmental non-intervention in employer-employee relations.

In the ‘Statement of Principles’ adopted at the Bombay convention of Swatantra Party in August 1959, it put Agriculture high in its list of priorities. The party highlighted the need for increasing food production ‘through the self-employed peasant proprietor who is interested in obtaining the highest yield from his land’, as well as no disturbance of ownership, cultivation and management of land. It firmly opposed collectivisation and bureaucratic management of the rural economy.

The Shenoys, and Mr Joshi

In the 1960s and ’70s, BR Shenoy was the lone dissenter among Indian economists when it came to central planning. Shenoy wrote incessantly in popular media on the dangers of central planning and the neglect of agriculture. So did his daughter, the economic historian Sudha Shenoy. I wrote about them in my earlier Brainstorm piece.

In 1978, one of the biggest champion of farmers emerged onto the political arena. Sharad Joshi started Shetkari Sanghatana, a farmers’ organisation to mobilise farmers to demand a fair market price for their produce. He believed that there was nothing inherently wrong with Indian agriculture. The problem lay with government. Even though his organisation was successful in mobilising large number of farmers across the country, it had limited success in agriculture policy reforms.

 A Tryst With Property Rights

In their book India’s Tryst With Destiny, Jagdish Bhagwati and Arvind Panagariya pointed to the lack of property rights as one of the key reasons for the poor productivity of Indian farm-land:

A key element in improving productivity is to reform the laws with respect to sales and rentals of agricultural land. Over the years, land-holdings have shrunk in size, with the result that today more than 80 percent of the land-holdings are less than two hectares and more than 60 percent holdings less than one hectare. Only 6.5 percent of the holdings are four hectares or larger. Ease of sales and rentals will help in the consolidation of holdings. Flexible rental laws, that allow the owner and the tiller to negotiate and sign formal agreements, will provide better security to the tiller and provide the necessary incentive for making productivity enhancing investments in land.

The Reforms Agenda

One of the foremost champions of agricultural reforms today is economist Ashok Gulati. In a chapter titled ’25 Years of Policy Tinkering in Agriculture’ in the recent book India Transformed: 25 Years of Economic Reforms, authors Gulati and Shweta Saini point out how agriculture has never been on the reform agenda in the era of economic reforms post-1991. Gulati and Saini affirm that Indian agriculture can grow at more than 4 percent per year, provided these three sets of reforms are carried out:

One: Getting the markets right. Here they prescribe a five-pronged strategy – liberalising global trade, repealing and reforming trade-restricting policies such as APMC and ECA, creating mechanism for risk mitigation and augmentation, deepening and expanding the physical (national and global) and financial markets, and investment in agricultural infrastructures.

Two: Rationalising food and agri-input subsidies and enhancing investments in scarce resources, mainly water management and agriculture R&D.

Three: Getting the best technologies within reach of farmers.

Mindset, Incentives

In his midway post, Amit asked for specific reform suggestions. I could put together a laundry list of suggestions, including those above. But the problem is not that the government doesn’t know about these ideas. The biggest obstacle to reform is dual: our ruling classes have the wrong mindset about governance; this mindset is validated by the incentives at play.

The mindset is paternalistic. The government behaves as if our poor farmers are incapable of making their own decisions, which is one reason why, as I explained in my last essay, free markets are not allowed in any aspect of agriculture. And when farmers get into trouble, they must be bailed out in the form of waivers and suchlike.

Now, think about the incentives at play. Farmers are a big vote bank, and politicians want to appear pro-farmer. The easiest way to do this is through paternalism – one reason why loan waivers have been part of the political playbook of more or less every party since independence. Equally, farmers want immediate, short-term relief from their woes. They want handouts from the mai-baap government. And so we go round and round.

How do we get out of this vicious circle?

Winter is Coming

Change is often forced upon us by a crisis. A balance-of-payments crisis forced the 1991 reforms. Our current agricultural crisis is getting worse, and might soon reach breaking point. Agricultural holdings are getting smaller and less sustainable with every generation. Equally, there is a jobs crisis already upon us. Things are going to get worse.

In the last Brainstorm essay, Nitin argued that the Agriculture crisis is in fact a jobs crisis. I agree. But see the mindset of our politicians. Soon after taking office as the youngest member of the council of ministers in 2009, the then Minister of State for Rural Development Agatha K Sangma had said, “As a minister, my goal is to prevent rural people from migrating to urban areas.”

Sangma was stating government policy. It remains the same today. That is the real crisis.

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About the author

Kumar Anand

Kumar Anand leads the research team at Nayi Disha in Mumbai. His research interests are in Indian economic history, history of economic thought and public choice economics.