The economy which may liberate India.The economy which thinks more about farmers, migrants, unorganised sector especially about the unskilled force of the country. The economy that may empower the marginal section of society, has our government thought of such economy in the last 73 years?
By Alam Srinivas
Two examples amplify the inability of the policy-makers and experts to understand the travails of ‘Rural India’, which forms the backbone of this country. The first relates to the move to corporatize farming, i.e. get farmers with small holdings to combine them under a bulk buyer. Officials say this will ensure income stability, as the companies will pay a fixed amount under legal contracts. It will save costs, as the buyer will ensure availability of inputs like seeds and fertilizers.
More importantly, it will save the hapless farmers from the clutches of the middlemen and moneylenders. What we conveniently forget is that companies can be more brutal, greedy, and insensitive to the needs of their workers, which will now include farmers who lease out their lands. If a farmer was unable to survive under the middlemen, what will he do against a giant corporate? Legal contracts are enforced through courts. In case of a dispute, can a farmer survive the judicial system?
A few years ago, the government started a crop insurance scheme for the croppers, which was managed by private insurers. The experts questioned it. A famous writer, who specializes in highlighting issues of the poor, said that the amounts that the private firms doled out as claims during a year was way less than the premium they collected from the farmers. Hence, the scheme was another means for the private parties to increase their profits at the expense of ‘Rural India’.
It was a lopsided argument. No insurance firm in the world operates on the principle that its annual outgoes (payments) will be the same as its inflows (collections). In fact, the trick in the business is to build huge cash bases, which can be used during emergencies. In the case of farmers, it implies crop failures due to floods or droughts. This is the idea behind insurance – to receive money during trying times, and not expect payments every year, even if the produce is good.
PepsiCo, which buys the crop in bulk for its chips, sued a few growers for millions of rupees. The reason: the farmers used discarded small potatoes to provide for seeds for the next season, which created patent-related issues
However, these examples highlight the reasons behind the plight of the farmers. Sadly, the understanding is wrong. Everyone agrees that agriculture is not remunerative. This is evident from the clarion call to double farm incomes. Several factors influence the earnings of the growers. The first is their inability to get a fair price despite the stated states’ MSPs. This is because they are unable to sell to the government agencies due to logistics issues or the latter’s apathy.
Middlemen exploit the farmers, both during gluts, i.e. excess production, and during shortages, i.e. crop failures. In the former case, the buyers slow down their purchases, and force down the prices to abysmally low levels. During the recent onion boom production in Maharashtra, they asked the growers to pay them money to lift the produce. Obviously, many croppers simply dumped the onions on the streets and roads. They couldn’t spend out of their pockets to sell them.
When there are scarcity situations, the farmers don’t have the quantities to sell to recover their costs. In a bid to augment their earnings, they dump the crops at whatever prices are offered to them, which is often as low as a fifth of the retail ones. In such cases, the rich farmers, middlemen, and corporate buyers benefit because they have storage facilities, ability to hoard, and manage the release of the crop so that they take the maximum advantage of the rising prices.
Companies are not a panacea for these problems. Despite contracts, they can force the farmers to capitulate through other means. In fact, they can create new disputes that put unusual pressures on the growers. Consider the recent case of the potato farmers in Gujarat. PepsiCo, which buys the crop in bulk for its chips, sued a few growers for millions of rupees. The reason: the farmers used discarded small potatoes to provide for seeds for the next season, which created patent-related issues.
Thanks to the intervention of the NGOs, the American beverages major withdrew the cases. However, in an arrogant fashion, it publicly warned the farmers that it could not use the seeds. If they wished to do so in the future, they had to sign lease agreements with PepsiCo. There was no legal flexibility for the farmers to manoeuvre. Either the growers had to fall in line, or they had to live with the constant fear that a huge company can drag them to the courts anytime it wished to.
What is generally forgotten in such cases is that farming isn’t merely an occupation, or a means to earn enough to feed families. In rural India, it is a way of life. A person’s social, economic, cultural, even political life revolves around agriculture. To consider it as an economic issue is to miss the point, the big picture. But this is exactly what the government does when it focuses only on farm incomes. A farm community is different from an urban milieu. The same rules don’t apply.
For example, consider the implications of corporate farming. Today, although he leads a hand-to-mouth existence, the independent farmer has the freedom to decide what to grow. He has the ability to mix-and-match, i.e. to grow several crops in various quantities in the same field, and during the same season. Apart from hedging risks, it allows him to ensure that there is a range of food to feed his family. In dire straits, he has the assurance that the household will not starve.
In a jiffy, this vanishes when the farmer leases his land to a company, and agrees to grow a single crop – possibly a cash crop that cannot feed the family – and sell at a pre-decided price. Suddenly, the grower finds himself in a bind. He feels like a slave in some ways, who has to do what he is told to do, when he is told to do so. The feeling of freedom, even if he didn’t exercise it, is gone. In some ways, his life becomes like a robotic worker, who does the same thing for eight hours every day.
The second issue which plagues the poor – a set of socio-economic safety nets. Various things were tried over the past seven decades. The first is, obviously, freebies – free power, free water, free housing, and so on
Nothing epitomizes the difference between the two situations better than what happened in the past four months during the COVID-19 crisis. As one heard and read, millions of urban migrants headed to their villages. They walked, ran, staggered in a bid to escape from a state, when their daily earnings became zero. Once they were home, they didn’t go hungry, or die. Neither did the other villagers. In fact, rural India proved extremely resilient to the virus’ economic effects.
There was only one reason to explain this fortunate turn of events. There was enough food at home. There was enough production of various kinds of crops. Hence, the villagers shared whatever they had among themselves. They could eat grains and pulses, as well as vegetables, which they had grown in different parts of the same fields. Similarly, urban areas, including the metros, were saved because of the excess vegetables grown in their vicinity, i.e. in the rural areas around them.
Imagine the scenario if large swathes of land were under corporate farming, growing a single crop, which possibly did not include grains, pulses, and vegetables. Thousands of villages and millions of rural folks may have starved. Since, logistics and transport were in coma, it may not have been possible to distribute food and dry rations. Both rural and urban areas may have suffered badly. Although the example is of an extreme emergency, the dangers are clear.
This brings us to the second issue which plagues the poor – a set of socio-economic safety nets. Various things were tried over the past seven decades. The first is, obviously, freebies – free power, free water, free housing, and so on. But corruption and stress on states’ finances have derailed them. More important, the richer lot among the farmers appropriated the benefits, which did not reach the destitute. Subsidies resulted in a bizarre situation of elite capture.
Recently, the economists have veered towards cash payments, which are paid directly into the beneficiaries’ bank accounts. One of them, which is being debated, is a regular, monthly Universal Basic Income, which provides basic and minimum sustenance. However, cash is misused; male members in a household blow it up in wasteful expenditures like alcohol and gambling. Women generally are not strong enough to force their husbands and sons to use it for living purposes.
Schemes like MNREGA, or money-for-work, started as a good idea but got bogged down by bureaucracy. It led to other negative effects. For instance, the cost of migratory labour shot up as more people decided to stay at home, and earn the meagre income under welfare projects. Moreover, as studies indicated, payments are delayed, which create different problems. In most cases, the poor need the money immediately, and if it comes later, it does not serve the purpose.
Insurance plans of various kinds remain restricted and limited because the insurers don’t wish to hike their exposures beyond limits. It is the same scenario as with the banks, which feel queasy to extend credit to the farmers because of fears of defaults. It is another matter that studies indicate that the poor are more prompt in their payments, compared to the middle and rich classes. In fact, the largest defaults are by the companies, which are prone to siphon off the loans.
While it is pertinent to look at the twin problems from the perspective of focussed plans, there needs to be a holistic vision. In the medium to long term, the way they can be tackled is through a strategy that combined agriculture with manufacturing and services. It has to cut across sectors and sources; farming cannot be seen in isolation, and treated as a unique problem. Like in the past, one has to understand that a farm household is also a manufacturer and provider of various services.
To double farm income, food processing and dairy has to be encouraged. Even small production units of products based on crops can be set in select areas that comprise dozens of villages. Similarly, there have to be opportunities for certain members of an agriculture household to acquire enough skills to enter the services sector. Only a combination can work. Farm incomes have to be augmented with those from non-agriculture sources. Or else, incomes can never be doubled.
Of course, this does not mean that we need to keep people in the villages, and kill their dreams, ambitions, aspirations, and desires to partake in the prosperity of their urban counterparts. Instead, villages have to become better and modern, and compete in terms of amenities and opportunities with the cities. Why cannot a village be as progressive as a town? Why does a village have to remain a village? One can always talk about smart cities, but why not smart villages along the same lines?
WRITTEN BY
Alam Srinivas