Harvesting new jobs

India has too many mouths to feed with too little in their pockets. Shifting jobs from the farming sector to other sectors can perhaps turn the situation around

Mohan Guruswamy Delhi

India's agriculture sector has for long been held to be a success story. That India is able to feed itself without having to wait for the next shipload of PL480 wheat, as was the case in the 1950s and the 1960s, is a remarkable achievement. The Malthusian nightmare that many predicted did not happen. The Green Revolution solved the problem of insufficient food production. But, now, a new crisis looms over us.
The crisis is due to an inter-related and complex set of problems arising out of low productivity and purchasing power, inadequate infrastructure, a gross inequality of state-conferred benefits and a perceptible withdrawal of the state from the agriculture sector.
Put differently, we still have far too many people dependent on agriculture for a living, just as we still have far too many people with few employment opportunities. Above all, we still have many farmers whose fortunes are determined by the monsoon.
At least 260 million people are still below the official poverty line, which means that one out of every four Indians suffers from not having enough income to meet daily food requirements. This inability to buy enough food will not be mitigated by just producing more. What we need is to produce enough jobs for these starving millions. When that happens, production will once again become the problem. And that day is not far off.
The GNP growth rates of the previous two decades, the 1980s and the 1990s, have been 5.7 per cent and 5.9 per cent respectively. It is now averaging around nine per cent. This clearly suggests that at least an eight per cent growth in GNP for the next two decades is on the cards.
The expert opinion is that "at this level India will require 374.7 million tonnes of cereals in 2020. This steep rise in demand will be due to the resultant higher per capita consumption of cereals and of livestock products. We are thus looking at a possible cereal deficit of 115 to 142 million tonnes. It is clear that the agriculture growth rate must accelerate considerably."
Current food production trends, however, are a cause for concern. The growth of total food grains, with the advent of economic reforms, limped back to 1.66 per cent compared to 2.85 per cent in the 1980s. The main reason for this has been the sharp decline in government spending on agriculture and irrigation infrastructure. The combined share of agriculture and irrigation in total Plan outlays has come down from the high of 31.04 per cent in the Fourth Plan to just 10.63 per cent in the 10th Plan.
On the other hand, there has been a constant increase in indirect support to agriculture, seen in the steep rise in the budgeted subsidies. These subsidies together now amount to over Rs 100,000 crore annually. Quite clearly, this has been at the expense of expanding the irrigation system, and improving rural infrastructure with more all-weather village roads, transportation and storage facilities. The opposition to India's subsidy regime is, thus, not as much against subsidising the farm sector but against its selective nature and the near shutdown of direct investments in creating a modern agricultural infrastructure.
These misdirected and even misguided agricultural subsidies towards electricity, fertiliser and procurement have also played a role in distorting popular perceptions about the quantum of the state's spending on agriculture. Furthermore, these subsidies have mostly benefited the relatively well-off farmers and have left the vast majority with little or nothing. Just like the recently announced loan waiver will.
The problems with India's economy will persist as long as the farming sector, particularly the vast majority who live in the rain-fed agricultural areas, continue to be ignored by our national planners and leaders. India will be a poor country, whatever the growth rate of its GNP is and however wealthy its industrialist and professional classes become, unless a way is found to make the lot of this section somewhat better.
Not only has there been a declining trend in growth, there has been a declining trend in productivity as well. The yield of rice and wheat, taken together grew at an annual rate of just 1.42 per cent in the 1990s compared to 3.15 per cent in the previous decade. Pulses fared worse, as their yield growth rate plummeted to 0.27 per cent in the 1990s, which was one-sixth of the level it attained in the 1980s (1.61 per cent). The decline in the annual growth rates of both food and non-food crops resulted in a decline in the yield growth rates of all crops taken together, which came down from 2.56 per cent in the 1980s to 1.02 per cent in the 1990s.
The picture looks even grimmer when India's agricultural productivity is benchmarked against other countries. India, which has the maximum area in the world under rice and wheat, ranks second in their production. However, India ranks 52 and 38 in terms of yields of rice and wheat respectively.
As if things were not bad enough, they are compounded by another crisis. This is the growing fragmentation of farm holdings. Over the years, the proportion of marginal holdings, that is less than one hectare, has been increasing sharply. They have gone up from 50.60 per cent in 1970-71 to 59.40 per cent in 1990-91. The latest data on this from Census 2001 are not yet available, but we must get ready for further marginalisation. What is even more worrisome is that 34.26 per cent of holdings were smaller than 0.20 hectares.
Overall, the average size of holdings has gone down from 2.30 hectares in 1970-71 to 1.55 hectares in 1990-91 and the average size of marginal holdings has fallen from 0.41 hectares to 0.39 hectares. This trend has no doubt contributed to the decline in productivity. But the state has not responded to the challenge with any scheme to encourage the purchase of adjacent land holdings to facilitate their consolidation into economically viable sizes, even with land ceiling restrictions in place.
An increase in agricultural production and productivity will in turn create jobs in the construction and engineering sectors. In the process, the per capita production in the farm sector will rise making it a commercially viable business. This is simple logic, but it continues to elude planners, administrators and, of course, last but not least, the leaders who determine the allocation of resources.
There can be little doubt that in the past 50 years, the economy has been irreversibly transformed. Fifty years ago agriculture was India's primary economic activity. Now, it is the smallest of the three sectors. The share of agriculture and allied activities in the country's GDP has declined continuously since Independence.
While agriculture accounted for more than half (56.89 per cent) of India's GDP in 1950, it went down to 20 per cent in 2005-06. This decline has meant a commensurate rise in the share of the industry and services sectors. The industrial sector, which contributed 14.27 per cent of GDP in 1950, now accounts for a little over a quarter (26.92 per cent); while services in the same period grew from 29.80 per cent to account for almost half (48.18 per cent). While the economy has been transformed, Indian society still remains primarily agrarian for the majority of the population. But this is changing, for while 68.45 per cent of the workforce found employment in the agriculture sector in 1983, by 1999-2000, this had come down to 59.84 per cent.
This meant a growth in the shares of both the manufacturing and the services sector as employers. Employment in the manufacturing sector grew from 14.34 per cent in 1983 to 17.43 per cent in 1999-2000 and the share of the services sector rose from 17.21 per cent to 22.74 per cent over the same period. This is encouraging but just not good enough.
The hugeness of the farm sector, in terms of employment, is clear from the fact that even the entire organised sector pales in front of it. In 2005, employment in the entire organised sector with 27.96 million in it was a mere one-eighth of the agriculture sector. While the much-touted information technology (IT) sector is bringing in huge foreign earnings and so much cheer, its potential to overcome the current employment drought in the country seems extremely minimal. The entire IT sector employed only 0.9 million persons in 2005. According to Kiran Karnik, till recently the president of the National Association of Software and Service Companies (Nasscom), even by 2010 the IT sector will generate only 2.1 million jobs (1.1 million in IT services and one million in BPO). This is small consolation for a country that adds around eight million to its labour force each year.
Looking at the employment situation, from 1983 to 1993-94, the workforce increased by 71.69 million. Thus, on an average, 7.1 million jobs were created each year during the period. If this trend was maintained in the following period (1993-94 to 1999-2000), the workforce should have increased by 43 million.
However, it increased by only 22.55 million. Thus, 20.45 million jobs were lost or not created during the period, exacerbating the chronic unemployment problem even further. The major reason for this is apparent. Employment in agriculture has remained dormant, despite employment growth in the industry and services sectors. But that has not been enough to make up for the negative growth in agriculture sector jobs. A transformation of the national economy would only occur when people move from agriculture to other sectors.
The real problem is still too many mouths with too little in the pockets to put enough food each day on their plates. The prospects are grim and running away from the problem is no longer a policy option. The only long-term solution is to bring down the number of people employed in the farm sector. There is that old saying about putting your money where your mouth is. We seem to have forgotten this, literally as well as figuratively. This shows in the precipitous decline of the state's spending on agriculture and irrigation. We seem to have forgotten that our real problem is still too many mouths with too little in their pockets to put enough food each day on their plates.