A Strategy For Real Agricultural Prosperity

Till 300 years ago, India was the richest country in the world as is evidenced by world trade over the past 2500 years. The discovery of America and the circumnavigation of the globe was the quest for India, known to history as the land of gold. Nothing could compare with the magnificence of the Mughal Empire.

Very little of India’s gold was actually mined here. India’s wealth mainly came from the export of its agricultural products. The cottons of Sind, the muslins of Macchalipatnam, the calicos of Calicut, the spices of Kerala (Indian pepper and spices were once weighed against gold) and even the teak of the forests that was used to build many of the ships that fought at Trafalgar.

India's agricultural wealth came from its excellent sunshine conditions and from the industry and hard work of its people. Indians used to be famous for their hard work, as they are today in any foreign country. They are the most intelligent and productive workers, if motivated by rewards for achievement and punishment for idleness. With social progress, the old compulsions of the oppressive caste system were eroded by social legislation but not replaced by any alternate motivator.

India has today reached a plateau in agricultural production where food grain production is sticking at about 200 million tonnes. The land under cultivation cannot be increased without grave ecological repercussions (in fact, the ratio is already too high and marginal land should be reverted to tree farming, as there is an acute shortage of equally necessary forest cover.)

India’s agricultural yields are also far below world standards. China produces much more on less arable land. Increased resources of irrigation, fertilizer and power do make small improvements, but not commensurate to the development investments of over Rs.100,000/- per hectare.

Agricultural production can be increased significantly as has been demonstrated in every district, by comparing the output of the average farmer with some of the progressive farmers in the same area. F.A.O. has calculated that India can produce 400 million tonnes of food grains with the existing agricultural resources. Using the same inputs, agricultural production can be doubled in a very short span of time provided there is the vital element of human motivation.

Accelerating agricultural production needs the mobilising of the most important national resources i.e. the 80 million owners of land on roughly 92 million land holdings. If they can be motivated to invest more into their land and work it harder, there will be an immediate and dramatic increase in agricultural production.

A system of motivation has, in fact, already worked successfully in India over the past 800 years. The existing system of land tax was started by Allauddin Khilji, extended by Sher Shan Suri and later codified by Todar Mal for Mughal administration. It was later adopted by the British and remains to this day the basis of the land revenue system. The old tax was calculated according to land potential and was used as a spur to increase output because as the farmers were forced to produce a surplus for the state they also produced more for themselves.

The system was to tax cultivators according to what the land was capable of producing. Farmers historically paid 25 to 40 percent of their produce (in kind) to the state. Over the years, the value of land revenue has however steadily diminished to be less than 0.7 percent of agricultural production today. In some states it has been abolished altogether. The total land revenue today accounts for less than 0.8 percent of the Government's total revenue. Today land revenue today is virtually dead.

If farmers are again required to produce an achievable extra production above their basic needs they can, and will, produce it. A modest 10 percent land tax could give the government and extra 20 million tonnes of food grains or an equivalent value of other crops. The government can sweeten this impost by also giving a 10 percent higher price while demanding the surplus.

An alternate to such a farm potential tax could be to impose a tax on underutilized lands. No farmer will be able to morally object to a tax for the misuse of this most important national asset. If absentee landlords and other idle farmers are induced to put in his extra effort, but also allowed to enjoy the fruits of any surplus, they would be a rapid shift from subsistence farming to commercial farming, and we will then quickly have a real green revolution in the entire country and not just in the over worked surplus producing areas that give India the bulk of its procurement.

The taxation must not be on output or on farmer's income because that would be a disincentive and would also lead to production falsification. But a tax on land potential is inescapable and allows cultivators to enjoy the fruits of their surplus. This is the key to success.

The system actually is quite easy to implement. The village patwari’s land record system is already based on land fertility, irrigation and potential. A proven and established land tax system is lying dormant and just needs to be stirred to life again.

The enemies of this proposal, who are also the enemies of Indian agricultural productivity, are the big farmers who have powerful political influence. It is estimated that 74 per cent of India's land holdings may be in units of less than 2 hectares, but they control only 23% of the land. It is estimated that over 52% of the land (the best land), is controlled by 11% of the farmers officially with holdings over 4 hectares (so 2.4% farmers control 23% of the land). These "Kulaks" are the real barriers to India's progress in agriculture. They can be moved, and they must be moved if India is to eliminate rural poverty.

Reducing their holdings through land ceilings or other legislation cannot work, as the implementation is through a petty bureaucracy that is dependent on the Kulaks.

It was through a similar strategy that China's achieved its agricultural revolution after 1980. All China’s lands are owned by the state. Co-operative and collective farms had in 30 years under Mao Ze Dong failed to increase output to meet their needs, despite heavy investments in irrigation, fertilizers, tractors and other inputs and despite a committed bureaucracy and a very dedicated and hard working peasantry.

Their strategy, like that of India, also produced a similarly miserable annual growth rate of 2.1%. In 1979 China had to import nearly half the food it needed to feed its cities. It imported 30 million tonnes. That was the end of Mao's socialist vision.

Mao’s successor Deng Xiao Ping turned the old policy on its head. In just four years the food output increased 33% (from 304 to 404 mt) or by a massive 100 million tonnes without much state investment. Instead of relying on collective or cooperative farms, the new government leased most of the land to peasant families in "family contracts" on condition that they produce a minimum for the state. They were however allowed to sell off any surplus they got above this at market prices. In four years, the yields not only increased dramatically, but the extra farm income triggered a spectacular demand for industrial products and luxury imports as well that quickly stretched their infrastructure of roads, power, finance, etc.

The Chinese experience clearly proved that rural progress cannot come either through technology, investments or through bureaucratic intervention but only by inducing motivation of the actual farmers at the grass roots level.

The Soviet Union had also tried to abandon the old Marxist system and is trying to adopt a similar route of passing on the co-operative lands to the tenant families in return for a minimum produce. But the effort was half hearted and the results have not been very impressive.

The Indian government’s over-focus on procurement has also over-emphasized the production of wheat and rice. This is unjust to many regions where these crops cannot grow. Coarse grains, millets, jowar, bajra, ragi, barley, maize etc., that get poor support prices are unprofitable and risky as a result.

Water is a huge problem with most of the affordable irrigation already exploited. Every July the normally dry Punjab plains will suddenly become one of India’s largest fresh water lakes with 2.6 million hectares covered by 22 cms of water. The boom in paddy cultivation is good but only 30% of this water will come from the monsoon rains, 23% will come from rivers and canals and the rest from tube wells pumping up water from the rapidly depleting underground aquifers. Not surprisingly the water table is falling at an alarming rate. This is also the case in most other agriculturally rich areas.

As water is a constraint, the government should discourage water demanding crops like rice and sugar cane and encourage coarse grains. This step will also move rural prosperity from the rich (surplus) districts to the dry land and hilly regions where India’s poverty is the most acute.

If the sales price of these were subsidized by about 10 per cent and paid for by a small levy on rice, which is ten times more water demanding, a market pull for these would immediately revolutionize the hilly, dry land and other marginal areas. It would also provide a more nutritious, protein rich cereal for the people.

There will be a dramatic effect on employment. Paradoxically the 2001 census data shows that there is an inverse ratio between rural prosperity and employment. In the rich states or districts less than 30 per cent of the workforce employed. In poorer areas the ratio is above 40 per cent. Female and child employment and exploitation are rampant in the poor areas. If Uttarkashi district shows 56 per cent of its rural population as workers, it does not mean employment is good, but that the poverty is so acute that the young or aged, men and women are all compelled to work to stay alive from one meal to the next.

Punjab and Haryana show 28 per cent their average rural population as workers. Female employment is less than 10 per cent of the workers, as against the 22 per cent all-India average. With prosperity, farmers take the women out of the wage pool to look after their families, cattle, vegetables, etc. Child labour is not reported but is considered to be highest in the poor districts. Children of more affluent farmers are sent to school. Increased prosperity therefore reduces the demand for employment until it mainly covers the adult males between the ages of 15 and 60.

Better rural employment cannot be achieved by creating more useless, low-grade jobs on roads, dams, or government departments, but by creating productive jobs that can support all members of every rural household. If the quality of life in rural India improves the massive migration to the already overstretched urban areas may slow down.

28. Rural India should not be seen as 743 million heads (2001 Census), but as roughly 120 million households of which 80 million have land. Per capita data completely distorts the picture as demonstrated by the poverty line hoax. The poverty line of Rs.65/- per capita p.m. at 1977-78 prices is equivalent to over Rs.2,000/- per family of 5.8 members at today's price. The subject has been highly exploited for political motives.

29. If India can generate an agricultural surplus, it will also revolutionize urban industry and employment. The rural sector is an important engine of growth in any agrarian economy. In India, this sector, statistically has now fallen to just 20 per cent of India’s GNP though it supports 72% of the population.

30. Small changes in this primary sector cause huge changes in the secondary and tertiary sectors, dependent on their output. All the carpenters, masons, cobblers, tailors, blacksmiths, shopkeepers, hoteliers, tea shops etc., will all immediately respond, triggering off a dramatic increase in organized and unorganised industry which actually accounts for about 15 per cent of the GNP.

31. Agricultural surplus will enable the country to plan its land use better. There will be a shift from food grains to higher value cash crops, oilseeds, fibres and ecologically important tree-farming. Commercial farming will enable farm income to enlarge faster than basic output.

32. One of the important spin-offs of land-tax is that it would make land ownership by the non-farming investors costly prompting them to disinvest their holdings. Such a step would lower land prices and thus gradually enable more the land to go to the real cultivators. It could also help in the consolidation of the many small holdings.

33. A modest 10 per cent tax by levy on the land will yield approximately Rs.15,000 crores. This is a small fraction of the amount spent every year by the overtaxed industry and service employees. (To say nothing of the huge burden on farm input subsidies).

34. The small farmers or cultivators on marginal lands can be exempted from such a land tax but this would not affect the richer farmers controlling most of India’s arable land.

One of the big problems of agricultural development lies in the fact that agriculture is a state subject. National Agricultural Policy is therefore largely academic, with the planners at the centre issuing directives and doling out resources in the hope that the States might adopt their programmes. Strategic change will be resisted by the vested interests of the big landowners and through their powerful influence on the state legislatures. The example of one bold successful state could however expose these "Kulaks" and mobilize the rest of the Indian peasantry to demand a collective prosperity that is achievable.

Few people understand the meaning of 'strategy'. Government planning has been purely 'operational' lying in the creation of resources and in monitoring their use. Progress does not depend on what the government does for the many thousand government officers, agronomists, extension workers, etc. are tiny drops in the ocean of 450 districts, each averaging 6000 square kilometers. Their influence is minute when compared to what can be done by motivating the 80 million cultivators who actually work on the land.

The impressive growth of India’s services and industry is commendable but it does not reach the many millions of India’s rural poor. If the cultivators can be shaken out of their lethargy and motivated to resolute action, progress and prosperity will touch the grass roots and India will rapidly regain its rightful place as one of the richest countries of the world.

Unfortunately India’s powerful lobby of rich farmers is a very strong component among India’s legislators at the centre and the states. They have deliberately diluted land reform, land revenue and promoted big subsidies on fertilizers, finance and fuel that enables them to prosper with even lower productivity. They want poverty to be perpetuated to give them a cheap and docile labour force. They don’t want to work harder and will strongly oppose a strategy for real rural change.

But they are not an insurmountable barrier. If the much larger numbers of farm workers and other rural people can be effectively mobilized their baleful influence can be democratically reduced.

The growth of India’s manufacturing and services sectors may be impressive but is largely confined to urban India. Poverty will never diminish without increased farm productivity in every district to make all of India prosperous.