It never rains but it pours

SIDHARTH BIRLA | Updated on January 24, 2018 Published on June 21, 2015

Paddy field

Climate-induced crises in agriculture have become the norm. But policy measures are reactive, not long-term in nature

It is probably the fifth time in 15 years (and the second in two) that India has been kept guessing about weather deviations and the consequent effects on the poorer sections of society and the economy in general; a reported 60 per cent of Indian farming has to “just rely on good monsoons”.

We have no control over the weather but we can attempt to mitigate its ill effects by clever planning, skilful decision making and — above all — by bringing about structural changes which can mitigate dependence of a large populace on the whims of the weather god. Fire-fighting strategies are good for the short run; we need to fortify for the long run. This will call as much for political determination as for sound decisions.

By its very nature, Indian public policy tends to be reactive (especially to a crisis) rather than pro-active. Rural distress triggers policy or political interventions with overdue attention on debating the social-crisis philosophy, instead of the solutions that are needed.

Agriculture needs policy

Agriculture is India’s largest private sector enterprise but has been effectively neglected at policy levels due to its limited and diminishing share in an otherwise growing GDP. Detailed ideas on restoring true viability in agriculture cannot be captured in the space here, but the core point is that agriculture needs a sound policy environment, predictable yet dynamic, just as industry and services do. If handouts and subsidies become the only way to keep agriculture afloat, the nation will stand weakened.

Deficient rainfall is not a drought. Yet, sufficient average rainfall is no guarantee of success, as both over- and under-supply damage output. Even though major cereal-producing States have irrigation backup, they are also dependent on groundwater replenishment, meaning they can weather one poor monsoon but not many. The real problems occur in the area of perishables (fruits, vegetables) or pulses and these shortages have a direct impact on inflation. Besides causing hardships to citizens, inflationary trends affect the real economy via monetary and interest rate policies, etc. The biggest unquantified impact arises from the topic of inflation occupying the political mind-space, restricting discourse on development agendas before the government of the day.

In 2014, Ficci’s national economic agenda (an aspirational document) spoke of the need to contain food inflation as one of the overriding priorities. Fruits and vegetables were identified as a key area of concern, both from an output point of view, and that of post-harvest preservation and distribution (calling for robust infrastructure). A proactive coordination framework called the Food Inflation Response and Strategy Team (FIRST) and controlled at the highest executive levels was suggested, designed to leverage real-time information to help moderate inflation via better distribution, procurement or management of stocks. Seeking global cooperation to grow fruits and vegetables in an arid countryside is also a real option.

Addressing the basics

Procurement price-led inflation was a real issue in the previous few years and in many ways this exemplifies the attempt to replace true farm viability with State benevolence. Moderation in this area, to address both inflation and fiscal concerns, obviously hits the economy by squeezing rural surplus. But we spend much time addressing collateral damage (for example, fall in rural demand, farmer distress) rather than the underlying causes (minimum economic sizes of farms, seed and soil health, productivity in farming practices, irrigation, distribution) for support prices becoming so crucial to maintain viability.

At the end of the day, mitigating the effects of climate on an economy is as much about making sure that people are employed steadily and non-seasonally to generate enduring incomes, as it is about ensuring that the country does not run short of food or face spiralling inflation.

Logically, non-farm employment creation can play a key role in ring-fencing rural distress from climatic anomalies. One report from McKinsey also points out that the most striking benefit to developing economies arose from the creation of close to 900 million non-farm jobs, many in low-to-medium skill areas. China alone added about 120 million non-farm jobs in manufacturing and services out of which 80 million were reported to be filled by people shifting out of low productivity (and income) agriculture. Vietnam witnessed a farm-to-factory evolution bringing down agri-employment from 66 per cent in 2000 to 50 per cent in 2010.

Huge challenge

Herein lies the challenge of stupendous magnitude. While India also created about 67 million non-farm jobs in 2000-2010, this just about kept pace with growth in the workforce and did not allow people to move upward from agriculture into better opportunities In the future, there are likely to be increased imbalances between high-skill and low-skill workers, with shortages at the higher end and a surplus at the lower.

For India, this implies the possibility of huge numbers with lower-end skills remaining trapped in subsistence agriculture or in urban poverty, as well as a risk of this imbalance pushing deeper inequality divides in society over time.

In India, the drive to develop respectable proportions of high-skill workers must be accompanied by a hitherto unparalleled thrust (including under social spending schemes) on construction and infrastructure to absorb people at low-skill levels. Expansion of labour-intensive manufacturing, adding industry which moves up the agricultural value chain (food-processing), and the like will all help the workforce move up the economic ladder and improve the resilience of the economy to shocks; but these will still take a lot of time to deliver results.

When rain, hailstorms and days of excess heat fade into the background, that is the time to really hit the drawing boards to evolve structural solutions taking into collective account (i) true economics and the viability of farming, (ii) the balancing aspirations of families involved in agriculture (particularly the youth) with alternative and better employment opportunities, and (iii) prudently and effectively channelling government spends in the rural sector (for example, support schemes like MGNREGA, support prices and stocking levels, etc). ‘Business as usual’ solutions are likely to be woefully insufficient; only fundamental reform will ring-fence our economy and farmers from the vagaries of the seasons.

This column explores ideas and opinions on Indian enterprise and economy. The writer is an entrepreneur and former president of Ficci. The views are personal

Published on June 21, 2015
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