The survival of the smallest

When the BSE Sensex, driven by global hot money flows, first touched 20k in December 2007, a financial daily celebrated the news with the headline “Super Power India”. But, when Indian farmers, without FII money or FDI, toiled and produced a record 257 million tonnes of foodgrains in 2011-12 and the Press Information Bureau proudly announced the record output in July 2012, the news was shoved to a corner.

Economic discourse has always been mixed up with that what is fashionable and modern. And the modern economic discourse equates development to urbanisation. Agriculture associated with rural life, far from being fashionable, is socially and economically regarded as index of backwardness. As urban living is indicator of both modernity and development, that settles the status of agriculture and also of agriculturists as un-modern and under-development.

It explains why farmers do not get brides for their sons and grooms for their daughters, however rich they are and however deserving their sons or daughters may be. Bottom-level government staff in towns command better social status than rich farmers. And those who sell their farm lands, move to cities, become peons in Sensex companies, and live in slums are considered modern because they sport a city pincode.

Inversely proportional

A high official reputed to be among those writing India’s economic policies for almost three decades shocked the IIT Bombay students when he said that if farm lands did not yield adequate return, farmers should sell their lands and invest in stocks and elsewhere for better returns. He was not joking. He was expounding rational choice economic theory. Yet, does it need a seer to say India might manage to live without stock markets but it certainly cannot without agriculture. And no country in the world has the land or the labour to produce food for India.

Yet the status of farming and farmers in India is inversely proportionate to their criticality to the nation. This inverse status is the final outcome of the neo-Varna modern economics, where finance rules at the top, IT services and the like run second, manufacturing comes next and agriculture remains at the bottom. How this inverse socio-economic order evolved needs some recall of economic history dating back to the birth of economics itself as a discipline.

Chayanov’s theory

Adam Smith, acclaimed as both the Adam and the Smith of economics, shaped the discipline on division of labour and economies of scale. As market economics evolved, economists applied the industrial principle of economics of scale to agriculture. They theorised that small and marginal farms would be gradually eroded by large farms and with industry opening up job opportunities, rural migration to urban area would bring in capital-intensive agriculture.

Even the Left agreed with the Right that the market economics would consign the small farmer to history. Karl Marx, who saw in the peasant both a capitalist because he owned a small piece of land and also a proletariat as he was his own wage worker, believed that the larger farmers would, in course of time, swallow the small peasants. [See Alexander Chayanov on the Theory of Peasant Economy . The University of Wisconsin Press]. In the 1920s, when the communist revolution shook Russia, a courageous intellectual — Alexander Chayanov — stood up against Marx and asserted that the small farmer would survive capitalism and, by implication, communism too. He postulated that peasant economy ought to be treated in its own right as a [non-capitalist] system of national economy, not as capitalist business enterprise. Asserting that peasant family farms were more competitive than large-scale farms, Chayanov said that family economy was distinct from the socialist economy and it should have its own theory.

This logic defied the Marx-Lenin prescriptions and that was adequate to arrest and dump Chayanov in concentration camp in the 1930s. He was released but later arrested on October 3, 1937, tried and shot on the same day for contending that the small farmer was not a capitalist.

But the world woke up to find the truth in his theory some three decades after Chayanov was killed and his theory of small farmer-family economy was discredited by both free market economists and communists. In the mid-1960s, the Western economic establishment found that small farming was not only not dying, and the small farmer, far from surviving, was out-competing larger farms. This led some think-tanks in the West to recover Chayanov’s thoughts from archives and translate them from the Russian.

Chayanov’s theory that the small farmer would survive and outcompete larger farmers is proved by the history that unfolded after him. Russia began celebrating — but a trifle late for its good — Chayanov but only when the Western scholars began finding the merit in his thoughts. Now, experience has confirmed that small farms are more efficient than large ones and that advantages of scale that apply to industry do not apply to agriculture. Now, come to Indian agriculture and the role of small farmers.

gaining prominence

According to Agricultural Census 2000-01, out of some 120 million farming households in the country, 98 million were small and marginal farms. Far from being wiped out, small farming is on the rise — with their number rising from 62 per cent in 1960-61 to 81 per cent in 2002-03. More recent data [2005-06] improve their number to 83 per cent. And the area operated by them has risen from 44 per cent from 19 per cent in 1960-61. With 44 per cent of the cultivated area, they account for more than two-thirds of national vegetables and milk production and more than half of cereals and fruits produced. In social terms, Scheduled Castes account for more than a fifth of small farmers and Scheduled Tribes, one-sixth. Their share of medium and large farms is far less than a tenth.

Studies say that the small farmer character of Indian agriculture is much more prominent today than even before. They are going to stay put in villages and not likely shift to urban areas to facilitate big farms and contract farms. The Planning Commission has concluded, though a little late, that “the small and marginal farmers are certainly going to stay for a long time in India”. But, with very little marketable surplus, their farming is hardly commercial.

Consequently market intervention policies, such as Minimum Support Prices and Procurement Price do not touch or reach small farmers who have negligible marketable surplus. [FAO Asia Pacific Commission on Agricultural Statistics 23rd Session April 26-30, 2010] In effect, some 100 million small and marginal farm households with a population of 40 crore feed themselves by tilling their small holdings. They have survived as Chayanov had prognosticated decades ago and not faded away as all other economic theoreticians had believed.

Assume that small farmers follow rational economic theories, give up farming and sell off their farms, what will happen to Indian agriculture? Agricultural production and productivity will fall by almost a third. And no country in the world can produce to fill the resulting demand-supply gap. And more, if they stop doing so, some others have to produce food for them and there is no one else, here or elsewhere in the world, who can feed them.

QED : It is true to say that our agriculture depends on small and marginal farmers, rather than say that small and marginal farmers are dependent on agriculture!

Even better, it is not that our villages are dependent on agriculture, but that our agriculture is dependent on villages. How ridiculous then is it to talk about urbanisation as the index of development, unless it is development sans agriculture? How does this match with the estimate that even by 2050 more than half of India will live in villages? Is anyone listening?

(The author is a commentator on political and economic affairs, and a corporate advisor)

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