An agricultural country
Published by Ravikiran Rao January 28th, 2004 in EconomicsI have often heard the lament that though 60% of our population depends on agriculture for its livelihood, agriculture contributes only 30% to our GDP. The person doing the lamenting usually wants to increase agriculture’s contribution to the GDP, not reduce the percentage of people depending on farming for their income. But if we do that, we will starve.
I’ve also heard the lament that though we are an agricultural country, we have difficulty feeding our population.
But the fact is, it is a choice. You can either be an agricultural country or you can feed your population, not both.
Let me explain. If agriculture contributes 30% to the GDP, it means (if you ignore exports and imports) that on an average we spend 30% of our incomes on food. I don’t spend 30% of my income on food and I am sure none of my middle-class readers does. This means that people poorer than us make up the average by spending a greater percentage of their income on food and in much greater numbers.
If the contribution of agriculture to the GDP is increased, these poor people will spend an even higher portion of their income on food than they do now. In other words, they will get poorer.
Now we have 60% of the population depending on agriculture. This means that 60% of the population gets 30% of the country’s income. In other words, they are poorer than the average Indian.
So choose from any two of the following three choices:
Be an agricultural country (i.e. have a high proportion of your people in agriculture)
Give your farmers a decent income.
Have your food cheap and available.
You can’t have all three.
Actually there is a way to have it in theory, but not in practice. Readers are invited to guess.
Just sounding off…see if the answer is right
#1 - Consolidate land holdings so as to make mechanization feasible.
#2 - Improve yeilds either by Hybrid seed or other means (more crop rotation or something…dunno)
#3 - Divert farm labour to other indegenous occupations - crafts and stuff like that
Will that achieve all three?
Ravages seems to go down the socialist path again…not what we want.
The only way to do it is by adopting communism. That’s why “in theory”, cause it’s never worked in practice. Not for lack of trying. Stalin / Mao / Pol Pot tried very hard. They were willing to break millions of eggs for this special omelette. No luck! (They should have read Mises’s Socialism tho’)
BTW, Ravages is right. In theory at least. And so is Patrix, coz this is not what we want! ;-)
Okay .. but why ignore exports / imports? Lets consider the first point - i.e. increase the output of agriculture. So if we have 60% of the people producing 60% of our GDP (the excess grain being exported) how will people get poorer?
Dont get me wrong. I am no socialist. I would like to think of myself as an unbridled capitalist.
But the question was is it possible, theoretically, and I thought, theoretically, the answers i said might just about manage it.
BTW - the third method, diverting (excess) farm labour to other means of occupation would help reduce dependency on agriculture, improve per capita income, and give you more goods to export. If that ain’t capitalistic, I dunno what is
It seems to suggest that there is poor productivity in the agricultural sector. What we should be thinking about is how best to raise the productivity (eg remove the dependency on the vagaries of the monsoon) and how to integrate the agricultural economy with global markets.
While India does export food grain and certain cash crops (like tea) these are usually in the form of commodities…the lowest end of the value chain. There is no export of fresh produce and packaged food stuff due to poor infrastructure and a food processing industry that remains in perpetual infancy.
The task is cut out - first, improve rural infrastructure; roads, electricity, irrigation, logistics and supply chain and second, incentivise food processing industry.
(also posted on Emergic.org)
Perhaps, one answer is value addition. India is even behind Pakistan when it comes to value-addition in agri exports. (Figures, if i remember right, are 30% in case of Pak and 7 or 8% ico India. More investment into agriprocessing would add value to agri products, increase rural income and also generate jobs.
I have also heard people argue for removing land ceiling and for freeing agricultural marketing. But I dont know what the current status is. Any idea?
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By the way, I dont see any problem with this: “60% of the population gets 30% of the country’s income”. Is it not the same old 80:20 rule. The real problem with the income distribution here is 30% of the population go to bed hungry. Their basic needs are not taken care of: no education, no healthcare and almost no decent water and food. If you are making a policy, you should look at tackling this (providing basic necessities), rather than bringing down the inequities. If bringing down inequality is your goal, you tend to focus on distribution of wealth, rather than generation. And you also tend to see wealthy people as crooks and exploiters.
The problem with Indian policy making is, I think, we have been raising a lot of noice about removing inequality, instead of looking at ways to ensure basic needs; and have ended up doing neither.
But my point is really simple. Its ok to have 60% of popultaion getting only 30% of income, as long as that 30% is not denied water, food, health and education.
This 30-60% idea or view has something quite appealing to me.
I share the same views about the anti-globalization movement you have expressed (did not for long even know what it was about).
Here you seem to be arguing partly against the straitforward capitalist way. And in my opinion you’re right!
For one, in general, just merely copying the Wester capitalist ways and technologies does introduce all its disadvantages (which are quite severe), too! Why not only take the better elements or improve upon it?
Secondly, the mere definition of ‘productive’ has to been reviewed very careful! The Western capitalism definition of productive is ‘consuming a heavy amount of fossil fuels and relying on sophisticated heavy machines’!
This has two disadvantages:
a) Agriculture should be about producing good and healthy food in a sustainable way. The focus on mere quantity is wrong. This has led to destruction of soils (through overuse, pesticides, fungizides, fertilizers; but also through compressing it with heavy machines), demineralized soils, uniform crops etc.
b) it is very energy intensive and needs complex technology (building the machines, logistics); and what if fossil fuels become too rare before sufficient replacement is there?
Maybe producing one’s own food with human power is the most productive way! Of course, there is lot of room for improvement, absolutely!
A little Wicksell. Paraphrased from his inaugural speech at the University of Upsala, ‘Ends and Means in Economics’.
If one farmer improves his productivity, he gets rich, but if they all improve their productivity, they get poorer as a class, but the country as a whole becomes better off, because it spends less on the farmers’ produce.
So improving farm productivity, will mean either that, farmers will be worse off, or over a period of time there will be a consolidation of land holdings, and an exodus of labour from the agricultural sector. So think I and Wicksell.
I had not read avelin’s post. I think productivity means very simply
Total Produce/Total No. of People engaged in Production
Typically, if you increase capital intensity, you will get higher productivity. Producing your own food with human power, maybe a little like what Pol Pot tried to do.
Though I agree with what seems to be avelin’s sentiment, that maybe an imitative development process maynot be the best deal, especially since the West is straying from the principles of Capitalism itself.
Gautam:
Do you really think productivity can be defined this simple? Productivity FOR WHAT, in WHICH TERMS? If you omit this, the meaning is productivity as a numerical measure determining the course, while in reality it should be the other way around (the course determining the numerical measurements).
If I favour a more human-centered production mode, I think of something with dignity, also for the labourers.
I give you an example of what happens, when the functional focus is lost, and numbers determine the course, this happened in the EU:
The attempts to increase productivity (numeric values, instead of real criterias!) have led to the following:
a) farmers need to be heavily subsidized (for this the MAJOR part of EU budget - tax payer’s money - is used, not for science of the like!!!)
b) TOO MUCH meat, butter, and milk are (or were) produced: It is all piled up and needs to be DESTRUCTED!
c) farm animals were degraded: Because e.g. cows were breeded for e.g. maximum milk produce, they lost self-reproduction capability widely, need heavy medicaments and antibiotica; the quality of the milk is lower due to the industrial food used, illnesses, and medicaments; and because of lower hygiene and requirement of wide-area distribution and long-term storage milk NEEDS to be pasteurized (contrary to public opinion I think this is bad for health, e.g. a calf dies if it is fed pasteurized milk I heard once)
d) older good races of farm animals are on the verge of extinction (i.e. cows that can produce high quality raw milk)
e) people want organic or so called ‘bio’ food and pay multiple times the price for it, if they can afford it
And so on.
It would have been better: To keep good animals, to produce less without pesticides and fungicides, to keep healthy soils, to distribute milk and food fresh, to save the money for subsidies, to have higher food prices but more money in the pocket of the tax paying citizen for it.
And so on.
In such an ideal (?) scenario the farmer would not have to oblige to ‘produce maximum quantity’ standards (because of higher prices), and would be able to live a quite comfortable life probably. He would use his spare time surfing with his laptop and WLAN through the internet and creating some intellectual property? I mean, why tear it all apart in the first place?
The intelligence is not in the capital, the capital follows the intelligence, no matter to which degree it is present or not, I think.
Maybe I am dreaming. But why should it not be possible?