The farm quandary

Shekhar Tomar | Updated on November 05, 2020

Can we move from farms to factories?

When evaluating a policy question, giving personal anecdotes is not the best way to frame the discussion. An anecdote can divert the conversation from the actual problem. However, in the case of the recent Farm Bills, anecdotes may best explain the main issue here.

Back in my village one evening in 2005-06, we were discussing farming and politics. One of our neighbours mentioned that everyone gets to choose the prices they charge for their output except the farmer. Being part of the sugarcane belt in west UP (my region), the farmers have a moderate income level. However, their income is highly dependent on the government fixing the prices and sugar factories choosing when to pay. The former always sets the prices below farmers’ expectations and the latter always delays the payments. This situation perfectly describes the interplay between government and market forces that decide the farming community’s future. So, how should an average farmer respond to the current Farm Bills?

Generally, debates around farm support policies are based on the micro-view of what is the best way to help farmers. However, the solution (better referred to as an eventuality) is more than evident if one talks to the farmers. Most farmers have decided that their generation will be the last one to engage in agriculture. Why? A cursory glance at the picture on the average farm size from the Agricultural Census of 2015-16 is more than sufficient to understand their reasoning. The average farm size was already very low in the 1970s and is just 1.08 hectares in 2015-16. What the farmers have realised over these years is that if your next generation stays back on the farm, it will lead to worse future outcomes. The improvement in farm yields is insufficient to guarantee a better future with the dwindling size of landholdings.

The two most important questions for the agricultural sector in India are (i) is it scalable? And (ii) is it sustainable? The answer is an emphatic “no” to both these questions. The small landholding size means that scaling up production/mechanisation is not possible. We can have small wins, now and then, thanks to better seeds and fertilisers. However, there is no way to deliver high growth in the agricultural sector without farm mechanisation on a large scale in the long run. It will involve the consolidation of landholdings and a smaller fraction of the population engaged in farming.

Scrap archaic laws

The political economy of farming and how to organise it, can only help in the short to medium term. We are still using the laws that probably made sense at the time of Independence, but since then, the nature of the job and aspirations have changed. The long-term policy now requires thinking over where the farming population can be meaningfully employed.

If one looks at history, India is not the first to grapple with this structural change in the economy where farming employs fewer people and adds lesser value to the aggregate GDP by the end of the transition. The latter has already happened even in the case of India. What has not happened to an equivalent extent is the shift of labour to other sectors.

The writing is on the wall, and the actions that we see today are just a reflection of the times to come. How we as a country manage this transition from farm to manufacturing/services is the only pertinent question. Farmers have already made up their minds, at least for their future generations. As for my neighbour and his question on the farmers not being able to choose their prices, I wish I were able to explain the issue of competition better at that time! The odds are firmly stacked up against an average farmer, whether dealing with an Aadhti or some other market player.

The writer is an Assistant Professor of Economics and Public Policy at the Indian School of Business

Published on November 05, 2020

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