I do not wish to prescribe remedies because many worthy experts have expressed their valuable views. Rather I will plead for the urgency of their implementation. The remedy lies in doing what is known. I will discuss how progress happens, why societies do not do what is obvious, and why it is important to bring agricultural marketing centre-stage.
How progress happens
As Lester Thurow3 points out, during the last 300 years, technological discontinuities occurred such as electricity, industrialisation, etc. These ushered in an era of huge inequality in incomes because only some nations seized the emerging opportunities. Thus the sectoral composition of their national economies and the workforce changed quite dramatically.
There is a second reality. Socialism has not exactly been successful over the last 70 years in its primary aim of suppressing inequality; in fact, it has collapsed. While market economies have not been free from problems, they accept that like turbulence in life, inequality is inevitable and they should leverage rather than suppress it. By encouraging a spirit of adventure, the system encourages people to respond to opportunities through the natural human instincts of greed, optimism and herd mentality. Indeed, through deregulation in the last 10 years, Indian per capita income relative to US per capita income has improved. In 1980, US was 105 times bigger, now it is 75 times bigger, and if Goldman Sachs is to be believed, by 2050, it will be only 5 times bigger, a level last achieved in 1700!
To recapitulate, there are two realities — first that the developed world protects agriculture to the detriment of poorer countries, making economic institutions like WTO as essential fora for change. Second, that inequality in some form is inevitable, we can morph the current one into a less virulent form of inequality, along with progress for common people. Both these require a shift in public policy to the principles of markets and competition from the traditional ones of regulation and support, and a view of agriculture as an agribusiness. It is time for greater boldness in Indian agricultural reform.
Not doing the obvious
Around 1930, Will Durant4 visited India, which interested him since his study for the celebrated book The Story of Civilization. Quite startled by what he saw, he wrote, "…I have seen a great people starving to death… due to the most sordid and criminal exploitation of one nation by another… even a casual traveller perceives the decay of agriculture…" After the Bengal famine of 1943, the Indian Agent General in Washington, Sir Girija Shankar Bajpai, melodramatically told the world while addressing the Combined Food Board, "In the south and west of India, 120 million people are already within uneasy hearing of the fluttering of the wings of the Angels of Death… for us, there can be no tightening of belts because you cannot straighten a straight line."
I recount this history because it would seem self evident that independent India's number one priority would have been agriculture. However, in those days, the rapid industrialisation of the Soviet Union was widely acknowledged as an even greater achievement than the progress of Meiji Japan. Nehru was fascinated5 year after year, in Plan documents and Budget speeches, that agricultural development was routinely mentioned as an item — agrarian reforms, rural institution building and improvement of farm practices.
By the mid 60s, the relative neglect of agriculture, exacerbated by US PL 480 supplies, blew into a crisis. India was now ready to do the rational after having tried all other alternatives, and the Green Revolution was unleashed. Given the historical background and the crisis of food shortage, the single-minded focus quite correctly was on food production, not on agricultural marketing. From a 2-per cent growth level prior to the 70s, the three-year moving average of agricultural production in the 1980-90 decade moved to over 3 per cent. Introduction of new seeds, expansion of irrigation, adoption of fertilisers and crop protection on a wide scale, all contributed to this resurgence.
However, the post liberalisation progress of Indian agriculture has been patchy. Public investment in agriculture used to be at 1.6 per cent of GDP in the early 90s. Between 1998-2002, such investment has fallen to 1.3 per cent of GDP, the agricultural production index has stagnated and the productivity of agriculture has made no progress. Worst of all, the consumption of fertilisers has become highly skewed due to some knee jerk response to the issue of fertiliser subsidies. Instead of the optimum NPK ratio of 4:2:1, the usage during these last four years has been 6.5:2.5:1. Such fertiliser usage actually does long-term damage to the soil and mars future production in hidden ways. The dismal situation in agriculture has been exacerbated by a four-year spell of bad monsoons in recent years.
Bringing agriculture centre-stage
The question can arise: can agriculture be brought centre stage merely through greater awareness and policy? Yes, see what happened with the Golden Quadrilateral Programme. It has made highway development and road building the engine of a huge amount of economic activity. The kilometres of roads our country builds each month nowadays far exceeds the kilometres built per year for the last 50 years.
It is not enough merely to bring agriculture centre stage, we need to shift emphasis to the marketing aspect from the production aspect. Our traditional mindset is to focus on production. Today, the agricultural marketing system and infrastructure are incapable of profitably absorbing even the current output. What I state may seem self-evident and obvious. But it is not uncommon to miss the obvious! That is why I do not propose to spell out the specific steps required. Let me use the example of electricity to illustrate how we tend to miss the obvious.
In the early 1990s, what was our response to the power shortage? We went out and set up fast track projects for power generation. For almost a decade, the whole nation was gripped with the gobbledegook of project financing and power purchase agreements while the distribution side was wallowing in inefficiency and apathy. In hindsight, the 90s have been a lost decade for electricity. It is only recently that the delicate task of unravelling the spaghetti of problems on the distribution side has begun.
And this is where the motivational issue lies. In an environment of short term-ism, coalition politics and expediency, the patient task of making agricultural marketing more farmer-friendly seems to have taken backseat for long. Just in the last few days, the government has shown awareness of the problems of agricultural marketing. A Rs 50,000-crore agricultural infrastructure fund was first announced. Then, at a national conference of State agricultural ministers, support was given to the agriculture ministry's model act on agricultural marketing. Perhaps a national commission for agricultural marketing could be set up to plan and execute the model act. It should comprise policy makers, professional marketers and agricultural experts.
Valedictory address by R Gopalakrishnan at the Agricorp-2004 conference of the Bombay Chamber of Commerce & Industry held at Mumbai on January 22, 2004.More Speakers' Forum articles: