In some ways, demography and agriculture are inextricably linked. India’s economic growth depends on it.
File image of Finance Minister Nirmala Sitharaman posing for photos before presenting the annual budget to Parliament. AFP
The budget documents are expected to be tabled in Parliament within days. And it is entirely possible that the government will focus on subsidies and creating incentives for industrial growth. But this author’s fervent prayer is that the government pay close attention to demographics and the agricultural sector. In some ways, the two are inextricably linked. India’s economic growth depends on it.
First, demographics. India has almost lost the demographic dividend it boasted to the world. It is quite possible that India has missed the bus. He failed to invest in his people. Its population growth rates have dropped alarmingly.
In fact, its population growth rate could fall below that of China unless India puts the right measures in place. But isn’t a decline in population good news for India? No. This means that more elderly people will have to be cared for by a shrinking population of young people. This will put increased pressure on already weakened health services and household costs.
Second, as Ruchir Sharma points out, no nation has been able to grow faster than 7% per year without a growing (young) population. What makes India’s case worse is that its southern and western revenue-generating states (which account for over 50% of India’s GDP and taxes) are experiencing declining birth rates. , while the poor and populous Hindi belt (which does not generate enough wealth) is experiencing a higher than replacement birth rate of 2.1.
When the wealth generators start to dwindle and those of the grant recipients increase, India will have a big problem. Add to that the government’s inability to make people of all sects and creeds work as one nation. The division will further cripple India’s ability to be productive. This will reduce the government’s ability to distribute benefits all the time. It can do this selectively, which could lead to more conflict and disruption.
Can the budget help?
So what should the budget do? It should first focus on education and health care. It is the first investment that a population needs. Without education, people cannot become more productive. This means that India’s school education needs to be overhauled.
True education is a state subject. But the center has the power to grant tax exemptions and subsidies. Link all tax exemptions and grants to measuring student, teacher and even school performance. Those who do well could expect better grants. Those who perform poorly risk losing their schools and all scholarships. Poorly run schools could be turned over to good education management. It can actually make learning and competing with the world more effective.
Same with health care. India’s education record is terrible – see its score on the Human Capital Index. The Indian population could have become immensely productive if investments had been made in human development.
More than 50 percent of India’s population is engaged in agriculture, and so this should be the next biggest item on the government’s agenda. To understand the seriousness of the problem, one must first recognize that the farmer today is extremely distressed, which also partly explains why this community has experienced the highest suicide rates.
Today, the small farmer earns little from cultivation and must supplement his income by daily wages elsewhere or by raising livestock. The rich farmer earns much more, partly because of government policies that favor large farmers and also because the government has not focused on moving small farmers up the value chain – through policies that allow extension actors to hold the farmer by the hand. This is what Narendra Modi did in Gujarat when he was chief minister.
It allowed actors such as drip irrigation companies to collect their subsidy amount only if they actually held farmers by the hand and taught them best farming practices. He also insisted that they ask students from nearby agricultural universities to accompany their field staff so that students could learn modern practices that classrooms were not equipped to teach.
The budget should encourage such ownership and focus on farmer literacy programs. Avoid subsidies because they make farmers dependent on government subsidies. Subsidies weaken the strong and reward the weak. Instead, have an MSP for all agricultural products including milk, especially in Uttar Pradesh.
Strengthen Farmers, Commodity Markets, and Warehouses by doing five things.
First, ensure that the Food Corporation of India (FCI) sources the grain it needs from commodity markets and not directly from farmers. This will prevent small farmers from being marginalized.
Second, create incentives for warehouses under the WDRA (Warehousing Development Regulations Act) which aimed to establish warehouses for every type of agricultural product within 50 km of any farmer in the country. If the farmer can sell his produce quickly, his level of distress will decrease.
Third, connect warehouses to the best managed FPOs for each product so that products can be processed and value-added for domestic and export markets. Follow the NDDB pattern, so brilliantly crafted by Verghese Kurien, the milkman from India. And stop discriminating against the dairy industry when it comes to taxation. Please also compensate the farmer for each old cattle he is not allowed to sell.
Fourth, allow small farmers to lease their land to larger farmers or corporations, so that they can obtain their income without having to lose ownership of the land to which they are sentimentally attached. It will also pave the way for the consolidation of agriculture, without losing the small farmer. Its rental may include a share of farm produce plus rental without losing ownership of the land.
Finally, gently nudge growers into hydroponics. This way, they can protect themselves against climate change, while increasing their productivity.
If this is done, farmers will have higher incomes, less distress. The increased purchasing power will result in increased demand for industry and the economy. This is the surest way to ensure GDP growth, while preparing a population for more difficult times ahead.
The author is a seasoned journalist