Diversifying India’s Economy: Breaking Away from Agricultural Dependence

TK Arun

Ever since early humans conflated the fertility of their own kind with that of the land and worshipped this source of abundance of themselves and sustenance, those who till the land have been accorded a status elevated beyond the rational – along with warriors who protect the tribe. Discussion of their affairs tends to get emotive. But policy, by definition, has to be rational.

Food is a vital but small, and increasingly smaller, part of the totality of things humanity needs to produce, to thrive, rather than merely subsist. Butter, guns and ploughshares figure as rhetorical, mutually exclusive alternatives that societies must choose from. We, in fact, need all of them, and much more – everything ranging from forest honey to satellites and three-nanometre microprocessors.

The less food costs, the more industries producing the rest can thrive.

Farm output is itself a huge collection, ranging from grain to alcohol, from root tubers to fruit, from nuts to nutmeg, from fibre to meat and fish. The less any kind of food costs, the better off producers of all other kinds of food. To indulge one section of farmers by increasing the price of their produce is to harm the competitiveness of all other sections of farmers, not to mention non-farm sectors.

Historically, some groups of farmers have been politically more powerful than others. Britain used to have the corn laws, which made imported grain expensive, benefiting landlords at the expense of the emerging industrial class. The Industrial Revolution called for cheap food to enable competitive wages. Out went the corn laws, and in came the world’s first superpower.

Farming produces not just food but also livelihoods. Policy cannot, while cheapening food, cheapen livelihoods also. That is the challenge.

Farmers are on the warpath, across Europe, demanding lower input prices, protection from imports and environmental regulation, and higher subsidy. Cheap Ukrainian wheat exports corrode Polish solidarity against Russian aggression. Farmer unrest threatens the solidity of Germany’s hard-wrought exile of xenophobia to a gory, much-regretted past.

The farm supports tiny fractions of rich-world populations, 2-5%, and accounts for similar shares of economic output. The rest of society can indulge and subsidise farming as a cultural legacy that must be protected. In India, things are different.

India and Farming

The proportion of the workforce engaged in agriculture dipped below 50% for the first time in 2011-12. Add the farm-dependent bits of the rural economy, the population living off agriculture is about half. How policy deals with the farm sector in India will necessarily differ from how it does in the rich world.

But policy has been a failure, so far. India produces and stocks far too much cereal, too less of protein and oil. Crops grow in agro-climatic regions totally ill-suited for them, at huge cost to exchequer and environment. Sugarcane is grown in the arid Deccan, soaking up subsidy and depleting groundwater. The floodplains of Bihar, ideal for cane that can survive submerged for weeks, shun the crop because cane must be crushed immediately after being cut, crushing calls for sugar mills, and mills mean relatively prosperous personnel, who cannot live in Bihar’s lawlessness.

The richest farmers in Punjab grow fruit and flowers, but the majority stick to grain, employing techniques that were necessary and viable during the Green Revolution, but have, over time, degraded the soil and call for evermore quantities of evermore expensive inputs to produce grain that must be sold at ever-rising prices to turn in a profit. The solution is not to persist with flawed policy at a higher cost to the exchequer, but to diversify intelligently, profitably, with buy-in from farmers.

In the long run, India has to free the bulk of its population from dependence on agriculture, which requires far fewer people than in the past. The population released from the farm has to be absorbed in industry and modern services. Fast growth of towns, where the bulk of industry and modern services would grow, would absorb enormous numbers in construction. For industry and services to thrive, wages must be competitive, and that calls for affordable food.

Imagine a world in which meat is cultured in sanitised factories, from cells harvested from different animal parts, rather than obtained by slaughter of animals fed on grain. Imagine breakthroughs in accelerated photosynthesis taking place in controlled environments in-house. Consider achievements of technology and scale that make such production of food more economical than traditional farming. This is not Soylent-Green fantasy but a future under construction.

It defies logic to make the cost of production the basis for a fair farm price without reference to achieved efficiency elsewhere, information about which is transmitted to India by imports and the futures market.

Can malnourished, hungry India turn its back on cheap, nutritious food, for the benefit of defending a dysfunctional status-quo?

Breaking entrenched policy inertia cannot be achieved by imperial fiat in the middle of sectarian tension. It calls for clarity on the goal and non-confrontational building of consensus.

TK Arun is a senior journalist based in Delhi.

The article was first published in The Economic Times as India has to free the bulk of its population from dependence on agriculture soon on February 20, 2024.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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Acknowledgment: This article was posted by Tanu Paliwal, a research intern at IMPRI.